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Tax Extensions 2019: How and When to Get One

Simply file IRS Form 4868 — but remember that getting an extension doesn’t give you more time to actually pay your taxes.

March 25, 2019

Image result for tax extension

When life gets in the way of filing your tax return by the April deadline, one thing can get you some relief: a tax extension.

You can get a tax extension for your 2018 tax return by filling out IRS Form 4868 and mailing it in, or you can do it online. Here are some do’s and don’ts.

Find the stamps

There’s nothing wrong with doing things the old-fashioned way and applying for a tax extension by snail mail (it’s less than a page long), but just get proof that you mailed it, says Lee Reams Sr., an enrolled agent in Newport Beach, California.

“Lots of times the IRS will come back and say, ‘We never got it,’” he warns.

Use your tax software to get a tax extension …

If you don’t want to fill out the paper Form 4868 for your extension, see if your tax software supports Form 4868 for tax extensions. Most do. You can simply follow the program’s instructions and see how to file a tax extension online that way.

… or head to the IRS’s Free File site

If you don’t plan to use tax software or haven’t decided which software to use, consider the IRS’ Free File website. The IRS partners with a nonprofit organization called the Free File Alliance to provide people who make less than $66,000 of adjusted gross income access to free, name-brand tax-prep software. Anybody — even people above the income threshold — can go there to file an extension online.

Note that the Free File site may not offer extensions all year, and that’s probably for good reason: You should request an extension on or before the April deadline to avoid a late-filing penalty from the IRS.

Getting an extension does not give you more time to pay — it only gives you more time to file your return.

Remember to still pay your taxes by the April deadline …

  • Getting an extension does not give you more time to pay — it only gives you more time to file your return. So even if you can’t file your return by the April deadline, you need to estimate your tax bill and pay as much of that as possible at that time, Reams says.
  • Anything you owe after the deadline is subject to interest and a late-payment penalty — even if you get an extension.
  • You might be able to catch a break on the late-payment penalty this year if you’ve paid at least 80% of your actual tax liability by the April deadline and you pay the rest with your return.

… and to file your return by the October deadline

Requesting an extension and making an estimated payment in April are just half the work. You still have to file your final return. If you don’t file by the extension deadline, the penalties could get worse.

Tax extensions for overseas taxpayers and military members

Some folks don’t necessarily need to worry about applying for tax extensions at all.

  • If you’re a U.S. citizen or resident who lived and worked outside of the country on the April deadline, you may automatically get two extra months to file your return and pay any amount due without having to request a tax extension.
  • People affected by certain natural disasters may automatically get more time, too (the time varies; check the list of qualifying disasters).
  • Some members of the military also get extra time automatically, depending on where they are and what they’re doing.

Tax Extensions 2019: How and When to Get One

The Tax Guy, the best tax preparation service in the U. S.  We will prepare your income taxes professionally, accurately and fast, usually within 24 hours.  We offer several safe and convenient ways to do your taxes.  Submit documents by Computer, Smartphone or Tablet or fax to our bank level encryption client portal, request a postage paid envelope or make an appointment.

The Tax Guy has been doing taxes and accounting for several decades.  We love numbers, and we love our customers!  Tax Preparation Made EASY!*hopefully:)

Behind on Your Taxes? An Extension May Not Be the Solution

Tax extensions have limitations. And in most cases, you’re better off pushing yourself to get your return completed by the original deadline.

Mar 23, 2019 at 8:48AM
April 2019 calendar with pin on 4/15 and the words tax day written in red

Image source: Getty Images.

With the April 15 tax filing deadline rapidly approaching, now’s the time to get moving on your return if you’ve been procrastinating. But what if you buckle down, gather your paperwork, and realize key documents are missing? Or what if you panic at the thought of filling out your return on your own but can’t find a decent tax preparer at this point of the season?

In either of these scenarios, you may be tempted to request a tax extension and buy yourself an extra six months to get your return submitted. But before you do, know that going this route could come back to really bite you.

How tax extensions work

The good thing about tax extensions is that you don’t need to justify your request for one to the IRS. All you need to do is fill out Form 4868 and get it over to the IRS before the actual deadline.

That said, the only thing your tax extension will do is give you six extra months to submit your return. It won’t get you out of paying your tax bill in April if you owe the IRS money.

And there’s the catch: You may not know that you owe money on your taxes if you don’t actually do them. But if your paychecks went up substantially last year in the absence of a raise, and you earned a lot of side income (say, from investments or a second job) that you didn’t pay estimated taxes on, then there’s a decent chance you’ll end up owing the IRS some cash this April. And if you don’t pay up by the 15th, you’ll start accruing interest and penalties on the sum you owe.

Incidentally, that late-payment penalty isn’t insignificant. It’ll amount to 0.5% of your unpaid taxes for each month or partial month they go unpaid, up to a total of 25%. That’s why it pays to make an effort to file your taxes on time. That way, if you have an underpayment, you can come up with a plan to get it paid off as quickly as possible.

Getting your return completed

There are several reasons why you might think you need extra time to do your taxes, but some of them are easily addressed. Let’s say you think you need an extension because you’re missing a few 1099 forms. You’re not actually required to submit 1099s along with your return, so if you’re lacking this document from a client you did freelance work for but have an accurate record of how much you were paid last year, that’s good enough. Furthermore, if you’re missing a 1099 from a bank or brokerage firm you have assets with, getting your hands on that document is usually a simple matter of making a phone call, or logging into your account and seeing if it’s available electronically.

Furthermore, if you’re missing receipts for business expenses and therefore don’t know what deductions to claim, you can always call those vendors and ask them to send copies. That might be quicker than tearing your home apart in search of them.

And if you’re seeking more time to submit your return because you slacked on hiring a professional to do the job for you, know that unless your situation is complicated, you can probably manage to file it yourself if you use electronic software. These programs are designed to guide you and help you avoid mistakes; countless filers use them to avoid paying tax preparers a premium.

Even if you’re not comfortable submitting your tax return without a professional’s input, you should, at the very least, run your numbers through a tax software program to get a sense of whether you owe the IRS money or not. That way, you can file an extension but still get moving on that tax bill before it ends up costing you more money than necessary.

If you absolutely can’t get your taxes done by April 15, then it pays to get an extension. Just be sure to explore all other options before going that route, especially if you suspect that you’ll end up owing the IRS some cash.

https://www.fool.com/retirement/2019/03/23/behind-on-your-taxes-an-extension-may-not-be-the-s.aspx

The Tax Guy, the best tax preparation service in the U. S.  We will prepare your income taxes professionally, accurately and fast, usually within 24 hours.  We offer several safe and convenient ways to do your taxes.  Submit documents by Computer, Smartphone or Tablet or fax to our bank level encryption client portal, request a postage paid envelope or make an appointment.

The Tax Guy has been doing taxes and accounting for several decades.  We love numbers, and we love our customers!  Tax Preparation Made EASY!*hopefully:)

Taxpayer Bill of Rights outlines rights for all taxpayers

IRS Tax Tips

March 27, 2019

Issue Number:    Tax Tip 2019-31

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This is the first tip in a two-part summary of the rights granted to all taxpayers.

Every taxpayer has rights when dealing with the IRS. The Taxpayer Bill of Rights takes these rights from the tax code and groups them into 10 categories. To help taxpayers interacting with the IRS understand their rights, the agency outlines them in Publication 1, Your Rights as a Taxpayer.

Here are the first five rights along with more information about each one:

The Right to Be Informed. Taxpayers have the right to know how to comply with tax laws. They are entitled to clear explanations of the laws and IRS procedures. Taxpayers have the right to know about IRS decisions affecting their accounts with clear explanations of the outcomes.

The Right to Quality Service. Taxpayers have the right to receive prompt, courteous and professional assistance when dealing with the IRS. They also have the right to speak with a supervisor about inadequate service. Communications from the IRS should be clear and easy to understand.

The Right to Pay No More Than the Correct Amount of Tax. Taxpayers must pay only the amount of tax legally due. This includes interest and penalties. The IRS must apply all tax payments properly.

The Right to Challenge the IRS’s Position and Be Heard. Taxpayers have the right to object to formal IRS actions or proposed actions. They can also provide justification with additional documentation. Taxpayers can expect the IRS to consider timely objections and documentation promptly and fairly. Taxpayers can expect a response when the IRS disagrees with the taxpayer’s position.

The Right to Appeal an IRS Decision in an Independent Forum. Taxpayers are entitled to a fair and impartial appeal of most IRS decisions. This includes appealing certain penalties. Taxpayers have the right to receive a written response from the IRS regarding a decision. Taxpayers generally have the right to take their case to court.

The IRS will include Publication 1 when sending a notice to taxpayers on a variety of issues, such as an audit or collection matter. Publication 1 is available in English and Spanish. All IRS facilities publicly display the rights for taxpayers.

More Information:

The Tax Guy, the best tax preparation service in the U. S.  We will prepare your income taxes professionally, accurately and fast, usually within 24 hours.  We offer several safe and convenient ways to do your taxes.  Submit documents by Computer, Smartphone or Tablet or fax to our bank level encryption client portal, request a postage paid envelope or make an appointment.

The Tax Guy has been doing taxes and accounting for several decades.  We love numbers, and we love our customers!  Tax Preparation Made EASY!*hopefully:)

Spread the word about a tax credit that helps millions of Americans

IRS Tax Tips

March 26, 2019

Issue Number:    Tax Tip 2019-30

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All individual taxpayers and families should claim tax credits for which they are eligible. Tax credits can not only reduce the amount of taxes owed, but some can result in a tax refund. The earned income tax credit is such a credit. It benefits millions of taxpayers by putting more money in their pockets.

The IRS encourages taxpayers who have claimed the credit to help their friends, family members and neighbors find out about EITC. They can go to IRS.gov/eitc or use the EITC Assistant tool on IRS.gov, available in English and Spanish. Word of mouth is a great way to help people who may be eligible for this credit in 2019 for the first time. People often become eligible for the credit when their family or financial situation changed in the last year.

Based on income, family size and filing status, the maximum amount of EITC for Tax Year 2018 is:

  • $6,431 with three or more qualifying children
  • $5,716 with two qualifying children
  • $3,461 with one qualifying child
  • $519 with no qualifying children

Every year, millions of taxpayers don’t claim the EITC because they don’t know they’re eligible. Here are some groups the IRS finds often overlook this valuable credit:

  • American Tribal communities
  • People living in rural areas
  • Working grandparents raising grandchildren
  • Taxpayers with disabilities
  • Parents of children with disabilities
  • Active duty military and/or veterans
  • Healthcare and Hospitality workers

Free tax help from volunteers:

The IRS works with community organizations around the country to offer free tax preparation services. They train volunteers who prepare taxes for people with low and moderate income. These volunteers can help determine if a taxpayer is eligible to claim the EITC. There are two IRS-sponsored programs:

  • Volunteer Income Tax Assistance: This program, also known as VITA, offers free tax return preparation to eligible taxpayers who generally earn $55,000 or less.
  • Tax Counseling for the Elderly: TCE is mainly for people age 60 or older but offers service to all taxpayers. The program focuses on tax issues unique to seniors. AARP participates in the TCE program through AARP Tax-Aide.

The Tax Guy, the best tax preparation service in the U. S.  We will prepare your income taxes professionally, accurately and fast, usually within 24 hours.  We offer several safe and convenient ways to do your taxes.  Submit documents by Computer, Smartphone or Tablet or fax to our bank level encryption client portal, request a postage paid envelope or make an appointment.

The Tax Guy has been doing taxes and accounting for several decades.  We love numbers, and we love our customers!  Tax Preparation Made EASY!*hopefully:)

Tax reform brought significant changes to itemized deductions

Tax Reform Tax Tip 2019-28

Tax reform brought significant changes to itemized deductions

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Tax law changes in the Tax Cuts and Jobs Act affect almost everyone who itemized deductions on tax returns they filed in previous years..  One of these changes is that TCJA nearly doubled the standard deduction for most taxpayers. This means that many individuals may find it more beneficial to take the standard deduction. However, taxpayers may still consider itemizing if their total deductions exceed the standard deduction amounts.

Here are some highlights taxpayers need to know if they plan to itemize deductions:

Medical and dental expenses
Taxpayers can deduct the part of their medical and dental expenses that’s more than 7.5 percent of their adjusted gross income.

State and local taxes
The law limits the deduction of state and local income, sales, and property taxes to a combined, total deduction of $10,000. The amount is $5,000 for married taxpayers filing separate returns. Taxpayers cannot deduct any state and local taxes paid above this amount.

Miscellaneous deductions
The new law suspends the deduction for job-related expenses or other miscellaneous itemized deductions that exceed 2 percent of adjusted gross income. This includes unreimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel.

Home equity loan interest
Taxpayers can no longer deduct interest paid on most home equity loans unless they used the loan proceeds to buy, build or substantially improve their main home or second home.

More information:
• Publication 5307, Tax Reform: Basics for Individuals and Families
• Publication 501, Standard Deduction, and Filing Information
• Schedule A, Itemized Deductions
• IRS Tax Map

IRS YouTube Videos:
• Interactive Tax Assistant – English | ASL

The Tax Guy, the best tax preparation service in the U. S.  We will prepare your income taxes professionally, accurately and fast, usually within 24 hours.  We offer several safe and convenient ways to do your taxes.  Submit documents by Computer, Smartphone or Tablet or fax to our bank level encryption client portal, request a postage paid envelope or make an appointment.

The Tax Guy has been doing taxes and accounting for several decades.  We love numbers, and we love our customers!  Tax Preparation Made EASY!*hopefully:)

Tax Time Guide: Protect personal, financial and tax information

IRS Newswire

Issue Number: IR-2019 -41

No photo description available.

WASHINGTON — The Internal Revenue Service today urged taxpayers to protect the security of their personal, financial and tax information. Con artists use scams and schemes to steal personal information and money from unsuspecting victims, particularly during tax time.

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax, and the tax reform information page.

The IRS doesn’t initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information. The public should be alert to scammers posing as the IRS to steal personal information. There are ways to know if it’s really the IRS calling or knocking on someone’s door.

The IRS also works with the Security Summit, a partnership with state tax agencies and the private-sector tax industry, to help protect taxpayer information and defend against identity theft. Taxpayers and tax professionals can take steps to help in this effort.

Protect personal information

Treat personal information like cash – don’t hand it out to just anyone. Social Security numbers, credit card numbers, bank and even utility account numbers can be used to help steal a person’s money or open new accounts. Every time a taxpayer receives a request for personal information, they should think about whether the request is truly necessary. Scammers will do everything they can to appear trustworthy and legitimate.

Avoid phishing scams

The easiest way for criminals to steal sensitive data is simply to ask for it. Learn to recognize phishing emails, calls or texts that pose as familiar organizations such as banks, credit card companies or even the IRS. These ruses generally urge taxpayers to give up sensitive data such as passwords, Social Security numbers and bank account or credit card numbers. They are called phishing scams because they attempt to lure the receiver into taking the bait.

Be aware that an unsolicited email with a request to download an attachment or click on a URL could appear to come from someone that you know like a friend, work colleague or tax professional if their email has been spoofed or compromised.

Don’t assume internet advertisements, pop-up ads or emails are from reputable companies. If an ad or offer looks too good to be true, take a moment to check out the company behind it. Type the company or product name into a search engine with terms like “review,” “complaint” or “scam.”

The IRS urges people to never download “security” software from a pop-up ad. A pervasive ploy is a pop-up ad that indicates it has detected a virus on the computer. Don’t fall for it. The download most likely will install some type of malware. Reputable security software companies do not advertise in this manner. For more information on reporting IRS-related phishing see “Report Phishing” on IRS.gov.

Safeguard personal data in daily, online activity

Taxpayers should safeguard their Social Security number. Provide it only when necessary.

Provide personal information over reputable, encrypted websites only. Shopping or banking online should be done only on sites that use encryption. People should look for “https” at the beginning of a web address (the “s” stands for secure) and be sure “https” is on every page of the site.

Use strong passwords

The longer the password, the tougher it is to crack. Use at least 10 characters; 12 is ideal for most home users. Mix letters, numbers and special characters. Try to be unpredictable – don’t use names, birthdates or common words. Don’t use the same password for many accounts and don’t share them on the phone, in texts or by email. Consider using a passphrase versus a password. Legitimate companies will not send messages asking for passwords. Receiving such a message probably means it’s a scam. Keep passwords in a secure place or use password management software.

Set password and encryption protections for wireless networks. If a home or business Wi-Fi is unsecured, it allows any computer within range to access the wireless network and potentially steal information from connected devices.

Use security software

An anti-malware program should provide protection from viruses, Trojans, spyware and adware. The IRS urges people, especially tax professionals, to use an anti-malware program and always keep it up to date.

Set security software to update automatically so it can be upgraded as threats emerge. Also, make sure the security software is “on” at all times. Invest in encryption software to ensure data at rest is protected from unauthorized access by hackers or identity thieves. Educate children about the threats of opening suspicious web pages, emails or documents.

Back up files

No system is completely secure. Copy important files, including federal and state tax returns, onto a removable disc or a back-up drive, and store it in a safe place. Federal and state tax returns are important financial documents. People need them from time to time for home mortgages or college financial aid applications. These steps also can help taxpayers more easily prepare next year’s tax return. If storing sensitive tax and financial records on a personal computer, use a file encryption program to add an additional layer of security.

Taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov. They can use these resources to get help when it’s needed at home, at work or on the go.

The Tax Guy, the best tax preparation service in the U. S.  We will prepare your income taxes professionally, accurately and fast, usually within 24 hours.  We offer several safe and convenient ways to do your taxes.  Submit documents by Computer, Smartphone or Tablet or fax to our bank level encryption client portal, request a postage paid envelope or make an appointment.

The Tax Guy has been doing taxes and accounting for several decades.  We love numbers, and we love our customers!  Tax Preparation Made EASY!*hopefully:)

Tax Time Guide: Contribute to an IRA by April 15 to claim it on 2018 tax returns

IRS Newswire

March 19, 2019

Issue Number:    IR-2019-46

WASHINGTON —The Internal Revenue Service reminded taxpayers today that it’s not too late to contribute to an Individual Retirement Arrangement (IRA) and still claim it on a 2018 tax return. Anyone with a traditional IRA may be eligible for a tax credit or deduction on their 2018 tax return if they make contributions by April 15, 2019.

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax, and the tax reform information page.

An IRA is designed to enable employees and the self-employed to save for retirement. Most taxpayers who work are eligible to start a traditional or Roth IRA or add money to an existing account.

Contributions to a traditional IRA are usually tax deductible, and distributions are generally taxable. To count for a 2018 tax return, contributions must be made by April 15, 2019 (April 17, 2019 for residents of Maine and Massachusetts). Taxpayers can file their return claiming a traditional IRA contribution before the contribution is actually made. The contribution must then be made by the April due date of the return. While contributions to a Roth IRA are not tax deductible, qualified distributions are tax-free. In addition, low- and moderate-income taxpayers making these contributions may also qualify for the Saver’s Credit.

Generally, eligible taxpayers can contribute up to $5,500 to an IRA for 2018. For someone who was 50 years of age or older at the end of 2018, the limit is increased to $6,500.

Qualified contributions to one or more traditional IRAs are deductible up to the contribution limit or 100 percent of the taxpayer’s compensation, whichever is less.

For 2018, if a taxpayer is covered by a workplace retirement plan, the deduction for contributions to a traditional IRA is generally reduced depending on the taxpayer’s modified adjusted gross income:

Single or head of household filers with income of $63,000 or less can take a full deduction up to the amount of their contribution limit. For incomes more than $63,000 but less than $73,000, there is a partial deduction and if $73,000 or more there is no deduction.

Filers that are married filing jointly or a qualifying widow(er) with $101,000 or less of income, a full deduction up to the amount of the contribution limit is permitted. Filers with more than $101,000 but less than $121,000 can claim a partial deduction and if their income is at least $121,000, no deduction is available.

For joint filers, where the spouse making the IRA contribution is not covered by a workplace plan, but their spouse is covered, a full deduction is available if their modified AGI is $189,000 or less. There’s a partial deduction if their income is between $189,000 and $199,000 and no deduction if their income is $199,000 or more.

Filers who are married filing separately and have an income of less than $10,000 can claim a partial deduction. Iftheir income is at least $10,000, there is no deduction.

Worksheets are available in the Form 1040 Instructions or in Publication 590-A, Contributions to Individual Retirement Arrangements. The deduction is claimed on Form 1040, Schedule 1. Nondeductible contributions to a traditional IRA are reported on Form 8606.

Even though contributions to Roth IRAs are not tax deductible, the maximum permitted amount of these contributions begins to phase out for taxpayers whose modified adjusted gross income is above a certain level:

  • For filers who are married filing jointly or qualifying widow(er), that level is $189,000.
  • For those who file as single, head of household, or married filing separately and did not live with their spouse at any time during the year, that level is $120,000.
  • For filers who are married filing separately and lived with their spouse at any time during the year, any amount of modified AGI reduces their contribution limit.

The Saver’s Credit, also known as the Retirement Savings Contributions Credit, is often available to IRA contributors whose adjusted gross income falls below certain levels. In addition, beginning in 2018, designated beneficiaries may be eligible for a credit for contributions to their Achieving a Better Life Experience (ABLE) account. For 2018, the income limits are:

  • $31,500; single and married filing separate
  • $47,500; head of household
  • $63,000; married filing jointly

Taxpayers should use Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the Saver’s Credit, and its instructions have details on figuring the credit correctly.

Taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov. They can use these resources to get help when it’s needed, at home, at work or on the go.

The Tax Guy, the best tax preparation service in the U. S.  We will prepare your income taxes professionally, accurately and fast, usually within 24 hours.  We offer several safe and convenient ways to do your taxes.  Submit documents by Computer, Smartphone or Tablet or fax to our bank level encryption client portal, request a postage paid envelope or make an appointment.

The Tax Guy has been doing taxes and accounting for several decades.  We love numbers, and we love our customers!  Tax Preparation Made EASY!*hopefully:)

Phony IRS calls increase during filing season

IRS Tax Tips

Issue Number: Tax Tip 2019-24

The tax filing season is a busy time for taxpayers, but scammers also stay busy. Taxpayers should be aware of several types of tax scams, but phone scams start to increase during the beginning of tax season and then remain active throughout the remainder of the year. Here’s how this scam generally works:

  • Scammers impersonating the IRS call taxpayers telling them they owe taxes and face arrest if they don’t pay.
  • The scammer may leave a message asking taxpayers to call back to clear up a tax matter or face arrest.
  • When taxpayers call back, the scammers often use threatening and hostile language.
  • The thief demands that the taxpayers pay their tax debts with a gift card, other pre-paid cards or a wire transfer.

Taxpayers who receive these phone calls should:

Taxpayers should remember that the IRS does not:

  • Call taxpayers demanding immediate payment using a specific payment method. Generally, the IRS first mails a bill to the taxpayer.
  • Threaten to have taxpayers arrested for not paying taxes.
  • Demand payment without giving taxpayers an opportunity to question or appeal the amount owed.

IRS YouTube Videos:
Tax Scams – English | Spanish | ASL
Dirty Dozen – English | Spanish | ASL

The Tax Guy, the best tax preparation service in the U. S.  We will prepare your income taxes professionally, accurately and fast, usually within 24 hours.  We offer several safe and convenient ways to do your taxes.  Submit documents by Computer, Smartphone or Tablet or fax to our bank level encryption client portal, request a postage paid envelope or make an appointment.

The Tax Guy has been doing taxes and accounting for several decades.  We love numbers, and we love our customers!  Tax Preparation Made EASY!*hopefully:)

Business taxpayers should take another look at their estimated tax payments

IRS Tax Tips

March 13, 2019

Issue Number: Tax Reform Tax Tip 2019-23

Image result for business tax

Taxpayers who pay quarterly estimated tax payments may want to revisit the amount they pay. The Tax Cuts and Jobs Act changed the way most taxpayers calculate their tax. These taxpayers include those with substantial income not subject to withholding, such as small business owners and self-employed individuals. The tax reform changes include:

  • Revised tax rates and brackets
  • New and revised business deductions
  • Limiting or discontinuing deductions
  • Increasing the standard deduction
  • Removing personal exemptions
  • Increasing the child tax credit

As a result of these changes, many taxpayers may need to raise or lower the amount of tax they pay each quarter through estimated taxes.

Alternatively, many taxpayers who receive income not subject to withholding, but who also receive income as an employee, may be able to avoid the requirement to make estimated tax payments by having more tax taken out of their pay. These taxpayers can use the Withholding Calculator on IRS.gov to perform a Paycheck Checkup. Doing so now will help avoid an unexpected year-end tax bill and possibly a penalty in the future.

Taxpayers with more complex situations might need to use Publication 505, Tax Withholding and Estimated Tax, instead.  This includes people who owe self-employment tax, the alternative minimum tax, or tax on unearned income from dependents, and people with capital gains or dividends.

Form 1040-ES can also help taxpayers figure these payments simply and accurately. The estimated tax package includes a quick rundown of key tax changes, income tax rate schedules for 2019 and a useful worksheet for figuring the right amount of tax to pay.

Estimated tax penalty relief
The IRS is waiving the estimated tax penalty for many taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year. This relief is designed to help taxpayers who were unable to properly adjust their withholding and estimated tax payments to reflect an array of changes under TCJA.

The IRS will generally waive the penalty for any taxpayer who paid at least 85 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two. The usual percentage threshold is 90 percent to avoid a penalty. For more information about the penalty and requesting the waiver, see Form 2210 and its instructions.

Separately, farmers and fishermen qualify for a waiver if they file their 2018 tax return and pay all taxes due by April 15, 2019; April 17 for residents of Maine and Massachusetts. The usual deadline is March 1.

The Tax Guy, the best tax preparation service in the U. S.  We will prepare your income taxes professionally, accurately and fast, usually within 24 hours.  We offer several safe and convenient ways to do your taxes.  Submit documents by Computer, Smartphone or Tablet or fax to our bank level encryption client portal, request a postage paid envelope or make an appointment.

The Tax Guy has been doing taxes and accounting for several decades.  We love numbers, and we love our customers!  Tax Preparation Made EASY!*hopefully:)

Tax Credits vs. Tax Deductions

Nerdwallet
March 5, 2019

tax-credit-vs-tax-deduction-story

Tax credits and tax deductions may be the most satisfying part of preparing your tax return. Both reduce your tax bill, but in very different ways.

  • Tax credits directly reduce the amount of tax you owe, giving you a dollar-for-dollar reduction of your tax liability. A tax credit valued at $1,000, for instance, lowers your tax bill by the corresponding $1,000.
  • Tax deductions, on the other hand, reduce how much of your income is subject to taxes. Deductions lower your taxable income by the percentage of your highest federal income tax bracket. So if you fall into the 22% tax bracket, a $1,000 deduction saves you $220.
* Example rate only. The United States uses a progressive tax system.
Would you rather have:
A $10,000 tax deduction… …or a $10,000 tax credit?
Your AGI $100,000 $100,000
Less: tax deduction ($10,000)
Taxable income $90,000 $100,000
Tax rate* 25% 25%
Calculated tax $22,500 $25,000
Less: tax credit ($10,000)
Your tax bill $22,500 $15,000

The catch to tax credits

  • Some are nonrefundable. That means that if you don’t owe a lot in taxes to begin with, you don’t get the full value if the credits take your tax bill below zero. In other words, a $600 tax bill combined with a $1,000 nonrefundable credit doesn’t get you a $400 tax refund check.
  • Some credits are refundable. If you qualify to take refundable tax credits — things such as the Earned Income Tax Credit or the Child Tax Credit — the value of the credit goes beyond your tax liability and can result in a refund check.
  • The IRS lays out specific criteria you must meet to qualify for both nonrefundable and refundable credits.

A big decision about tax deductions

There are two types of tax-deduction strategies: taking the standard deduction or itemizing.

Itemizing allows you to total the amount you spent on allowable deductions. … If together they exceed the value of the standard deduction, you’ll want to itemize.

The standard deduction

  • The standard deduction is a one-size-fits-all reduction in the amount of your income that’s subject to tax. You don’t have to do anything to qualify for the standard deduction or provide any documentation.
  • You can claim the standard deduction on Form 1040. The amount varies depending on your filing status.
Filing status 2018 tax year 2017 tax year
Single $12,000 $6,350
Married, filing
jointly
$24,000 $12,700
Married, filing
separately
$12,000 $6,350
Head of
household
$18,000 $9,350

Itemizing

  • Itemizing allows you to take advantage of deductions such as home mortgage interest, medical expenses or charitable donations. If together your itemized deductions exceed the value of the standard deduction, you’ll want to itemize so you pay less tax. You’ll need to use the regular Form 1040 and Schedule A.
  • Taking the standard deduction or itemized deductions is an either/or situation. You can do one or the other, but not both.

Just as with tax credits, taking certain deductions requires meeting certain qualifications based on your filing status, current life events and the amount of your income that’s taxable. Be sure you meet IRS criteria to qualify for both tax credits and deductions.

Tax Credits vs. Tax Deductions

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