Get Credit for Retirement Savings Contributions

Taxpayers who contribute to a retirement plan, like a 401(k) or an IRA, may be able to claim the Saver’s Credit. This credit can help a person save for retirement and reduce taxes at the same time.

Here are some key facts about the Retirement Savings Contributions Credit:

Nonrefundable Credit. The maximum contribution is $2,000 per person. Those filing a joint return can also contribute $2,000 for the spouse. However, the credit cannot be more than the amount of tax that a taxpayer would otherwise pay in taxes. This credit will not change the amount of refundable tax credits.

  • Income Limits. Taxpayers may be able to claim the credit depending on their filing status and the amount of their annual income. They may be eligible for the credit on their 2016 tax return if they are:
    • Married filing jointly with income up to $61,500
    • Head of household with income up to $46,125
    • Married filing separately or a single taxpayer with income up to $30,750
  • Other Rules. Other rules that apply to the credit include:
    • Taxpayers must be at least 18 years of age.
    • They can’t have been a full-time student in 2016.
    • No other person can claim them as a dependent on their tax return.
  • Contribution Date. A taxpayer must have contributed to a 401(k) plan or similar workplace plan by the end of the year to claim this credit. However, the taxpayer may contribute to an IRA by the due date of their tax return and still have it count for 2016. The due date for most people is April 18, 2017.
  • Interactive Tax Assistant Tool. The ITA tool is a tax law resource that asks taxpayers a series of questions and provides a response based on the answers. Taxpayers can use Do I Qualify for the Retirement Savings Contributions Credit? to determine if they qualify to claim the Saver’s Credit.
  • Form 8880. File Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit.
  • Free File. Any taxpayer who can claim the credit may prepare and e-file their tax returns for free using IRS Free File. The tax software will do the math and complete the right forms. Free File is available only through the IRS.gov website.

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.

Tax Time Guide: ‘Where’s My Refund?’ Tool Best Way to Check Tax Refund Status

IRS YouTube Videos:

WASHINGTON — The Internal Revenue Service reminded taxpayers today that while more than 90 percent of federal tax refunds are issued in 21 days or less, some refunds may take longer. Many factors can affect the timing of a refund after the IRS receives the return. Also, taxpayers should take into consideration the time it takes a financial institution to post the refund to an account or for it to arrive in the mail.

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.

“The majority of taxpayers receive a refund, and we understand those filers want to know when their refund will be issued. Our ‘Where’s My Refund?’ tool continues to be the best way for taxpayers to get the latest information,” said IRS Commissioner John Koskinen.

This is the ninth in a series of 10 IRS tips called the Tax Time Guide. The guide is designed to help taxpayers as they near the April 18 tax filing deadline.

Taxpayers eager to know when their refund will be arriving should use the “Where’s My Refund” tool rather than calling the IRS 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 ”Where’s My Refund?”

Contrary to a myth rumored in social media, 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.

“Where’s My Refund?” can be checked 24 hours after the IRS has received an e-filed return or four weeks after receipt of a mailed paper return. “Where’s My Refund?” has a tracker that displays progress through three stages: (1) Return Received, (2) Refund Approved and (3) Refund Sent.

Users who access “Where’s My Refund?” on IRS.gov or the IRS2Go app must have information from their current, pending tax return to access their refund information.

The IRS continues to strongly encourage the use of e-file and direct deposit as the fastest and safest way to file an accurate return and receive a tax refund. The IRS expects that more than four out of five tax returns will be filed electronically, with a similar proportion of refunds issued through direct deposit.

The IRS Free File program offers free brand-name software to those with incomes of $64,000 or less. Seventy percent of the nation’s taxpayers are eligible for IRS Free File. All taxpayers, regardless of income, can use Free File fillable forms, which provide electronic versions of IRS paper forms to complete and file. Both options are available only through IRS.gov.

Are Tips Taxable? IRS Offers ‘Tips’ on Tips

Generally, income received in the form of tips is taxable. The IRS provides some information that helps taxpayers report tip income correctly:

  • Interactive Tax Assistant Tool. The ITA tool is a tax-law resource that asks taxpayers a series of questions and provides a response based on the answers. Taxpayers can use Is My Tip Income Taxable?.
  • Show all tips on a tax return. Use Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to report the amount of any unreported tip income to include as additional wages. This includes the value of non-cash tips such as tickets, passes or other items.
  • All tips are taxable. Pay tax on all tips received during the year. This includes tips directly from customers and tips added to credit cards. This also includes  tips received from a tip-splitting agreement with other employees.
  • Report tips to an employer. If employees receive $20 or more in any month, they must report their tips for that month to their employer by the 10th day of the next month. Include cash, check and credit card tips received. The employer must withhold federal income, Social Security and Medicare taxes on the reported tips.
  • Keep a daily log of tips. Use Publication 1244, Employee’s Daily Record of Tips and Report to Employer, to record tips. This will help report the correct amount of tips on a tax return.

For more on this topic, see Tip Recordkeeping & Reporting and Publication 531, Reporting Tip Income, 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.

Free Tax Help Available for the Military

The Volunteer Income Tax Assistance program provides free tax help to military members and their families. On or off base, VITA is easy to find — even overseas.   Keep these five tips in mind about free tax help for the military:

1. Armed Forces Tax Council. The Armed Forces Tax Council directs the military tax programs offered worldwide.

2. Certified Staff. Military VITA-certified employees staff these sites. They receive training on military tax issues, like tax benefits for service in a combat zone. They can help with special extensions of time to file tax returns and to pay taxes or with special rules that apply to the Earned Income Tax Credit.

3. What to Bring. Take the following records to a military VITA site:

  • Valid photo identification.
  • Social Security numbers for the taxpayer, their spouse and dependents; or individual taxpayer identification numbers (ITINs) or adoption taxpayer identification numbers (ATINs) for those who don’t have Social Security numbers.
  • Birth dates for the taxpayer, their spouse and dependents.
  • Wage and earning forms, such as Forms W-2, W-2G, and 1099-R.
  • Interest and dividend statements (Forms 1099).
  • A copy of last year’s federal and state tax returns, if available
  • Routing and account numbers for direct deposit of a tax refund.
  • Total amount paid for day care and the day care provider’s identifying number. This is usually an Employer Identification Number or Social Security number.
  • Other relevant information about income and expenses.

4. Joint Returns. If married filing a joint return, generally both persons need to sign. If both can’t be present to sign the return, they should bring a valid power of attorney form unless eligible for an exception. Publication 501, Exemptions, Standard Deduction, and Filing Information, has more details.

5. Use IRS Free File. Taxpayers with income of $64,000 or less qualify for Free File software. Those with income more than $64,000 can use Free File Fillable Forms. Using the IRS2Go app, a taxpayer can now use their cell phone or tablet to prepare and e-file their federal tax return through IRS Free File.

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:

IRS YouTube Videos:

Debt Cancellation May be Taxable

If a lender cancels part or all of a debt, a taxpayer must generally consider this as income. However, the law allows an exclusion that may apply to homeowners who had their mortgage debt canceled in 2016.

Here are 10 tips about debt cancellation:

  1. Main Home. If the canceled debt was a loan on a taxpayer’s main home, they may be  able to exclude the canceled amount from their income. They must have used the loan to buy, build or substantially improve their main home to qualify. Their main home must also secure the mortgage.
  2. Loan Modification. If a taxpayer’s lender canceled or reduced part of their mortgage balance through a loan modification or ‘workout,’ the taxpayer may be able to exclude that amount from their income. They may also be able to exclude debt discharged as part of the Home Affordable Modification Program, or HAMP. The exclusion may also apply to the amount of debt canceled in a foreclosure.
  3. Refinanced Mortgage. The exclusion may apply to amounts canceled on a refinanced mortgage. This applies only if the taxpayer used proceeds from the refinancing to buy, build or substantially improve their main home and only up to the amount of the old mortgage principal just before refinancing. Amounts used for other purposes do not qualify.
  4. Other Canceled Debt. Other types of canceled debt such as second homes, rental and business property, credit card debt or car loans do not qualify for this special exclusion. On the other hand, there are other rules that may allow those types of canceled debts to be nontaxable.
  5. Form 1099-C. If a lender reduced or canceled at least $600 of a taxpayer’s debt, the taxpayer should receive Form 1099-C, Cancellation of Debt, by Feb. 1. This form shows the amount of canceled debt and other information.
  6. Form 982. If a taxpayer qualifies, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. They should file the form with their income tax return.
  7. IRS.gov Tool. Taxpayers should use the Interactive Tax Assistant tool – Do I Have Cancellation of Debt Income on My Personal Residence? – on IRS.gov to find out if their canceled mortgage debt is taxable.
  8. Exclusion Extended. The law that authorized the exclusion of cancelled debt from income was extended through Dec. 31, 2016.
  9. IRS Free File.  IRS e-file is fastest, safest and easiest way to file. Taxpayers can use IRS Free File to e-file their tax return for free. If they earned $64,000 or less, they can use brand name tax software. The software does the math and completes the right forms for them. If they earned more than $64,000, they can use Free File Fillable Forms. This option uses electronic versions of IRS paper forms. It is best for those who are used to doing their own taxes. Free File is available only on IRS.gov/freefile.
  10. More Information. For more on this topic see Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments.

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.

Free Help Preparing Tax Returns Available Nationwide

The Internal Revenue Service reminded taxpayers that they may be eligible to receive free tax help at nearly 12,000 preparation sites nationwide. The sites, generally located at community and neighborhood centers, provide tax assistance to taxpayers with low- and moderate-incomes and the elderly.

The IRS Volunteer Income Tax Assistance (VITA) program offers free tax help to individuals who generally make $54,000 or less, persons with disabilities, the elderly and individuals with limited English proficiency who need assistance in preparing their taxes. The Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly those who are 60 and older. The IRS certified VITA and TCE volunteers are trained to help with many tax questions, including credits such as the Earned Income Tax Credit and the Child and Dependent Care Credit.

The Earned Income Tax Credit (EITC) is a significant tax credit for workers who earned $53,505 or less in 2016. Last year, more than 27 million eligible workers and families received almost $67 billion in EITC, with an average EITC amount of $2,455. The maximum EITC amount for 2016 is $6,269 for qualifying families with three or more children. In order to receive the credit, eligible taxpayers must file a tax return, even if they do not have a filing requirement. The VITA and TCE programs can help answer many EITC questions and help taxpayers claim the credit if they qualify. Taxpayers may also use the IRS.gov EITC Assistant to help them determine their eligibility.

Before visiting a VITA or TCE site, taxpayers should review Publication 3676-B to be aware of the services provided. To find the nearest VITA or TCE site, taxpayers can use the VITA and TCE locator tool available on IRS.gov, download the IRS mobile app IRS2GO or call 800-906-9887.

For assistance preparing a tax return at a VITA or TCE site, taxpayers must bring all required documents and information including:

  • Proof of identification (photo ID) for taxpayer and spouse
  • Social Security cards for the taxpayer, spouse and dependents
  • An Individual Taxpayer Identification Number (ITIN) assignment letter may be substituted for those who do not have a Social Security number
  • Proof of foreign status, if applying for an ITIN
  • Birth dates for the taxpayer, spouse and dependents
  • Wage and earning statements (Form W-2, W-2G, 1099-R,1099-Misc) from all employers and other payers
  • Interest and dividend statements from banks (Forms 1099)
  • Health Insurance Exemption Certificate, if received
  • A copy of last year’s federal and state returns, if available
  • Proof of bank account routing and account numbers for direct deposit such as a blank check
  • To file taxes electronically on a married-filing-joint tax return, both spouses must be present to sign the required forms
  • Total amount paid for daycare services and the daycare provider’s tax identifying number such as their Social Security number or business Employer Identification Number
  • Forms 1095-A, B and C,  Health Coverage Statements
  • Copies of income transcripts from IRS and state, if applicable

In addition, the military and the IRS join together to provide free tax assistance to military personnel and their families. The Armed Forces Tax Council (AFTC) consists of the tax program coordinators for the Army, Air Force, Navy, Marine Corps and Coast Guard. The AFTC oversees the operation of the military tax programs worldwide, and serves as the main conduit for outreach by the IRS to military personnel and their families. Volunteers can also address military specific tax issues, such as combat zone tax benefits and the effect of the EITC guidelines.

In addition to free tax return preparation assistance, most sites will file returns electronically for free. Combining e-file with direct deposit is the fastest and most accurate way to file. The IRS issues nine out of 10 refunds in 21 days or less. Paper returns take longer to process. Taxpayers who chose to file electronically and owe, can make a payment by the April 18, 2017, deadline using Direct Pay. This IRS free service allows taxpayers to make secure payments from a checking or savings account It also allows the taxpayer to get an automatic extension of time to file when Direct Pay is used to make a payment.

Taxpayers that prefer to file their tax returns electronically have the option of using IRS Free File. IRS Free File offers brand-name tax software to taxpayers who earned $64,000 or less in 2016 to file their returns free. Taxpayers who earned more can use Free Fillable Forms, the electronic version of IRS paper forms. IRS Free File is only available through the IRS website by visiting IRS.gov/freefile.

Tax Time Guide: Save Time, Make an Appointment before Visiting an IRS Taxpayer Assistance Center

The Internal Revenue Service has reminded taxpayers that service at all of its Taxpayer Assistance Centers is now by appointment. Appointment service saves taxpayers time by ensuring they get the help they need without having to wait in line.

Taxpayers can visit IRS.gov to find quick tax-related answers 24 hours a day, seven days a week. The IRS Interactive Tax Assistant is an excellent resource to get answers to commonly-asked questions.

This is the fifth in a series of 10 IRS tips called the Tax Time Guide. It is designed to assist taxpayers as they approach this year’s tax filing deadline, April 18.

Many people come to Taxpayer Assistance Centers looking for tax forms such as Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, when they are readily available on IRS.gov. Some libraries and other locations also may carry the most commonly used tax forms and schedules.

Other self-service options easily found on IRS.gov include refunds, transcripts and tax payments. Taxpayers who visit IRS offices to make routine tax payments should consider online payment alternatives. They can pay online, by phone or via a mobile device and get instant confirmation their payment has been sent.

If taxpayers need their prior-year adjusted gross income to complete the electronic filing process they should use Get Transcript Online or Get Transcript by Mail or review other options. Be aware that ordering a tax transcript will not reveal a refund delivery date. The “Where’s My Refund?” tool has the most up-to-date information on refunds.