Tax Tips for Individuals

The Tax Cuts and Jobs Act was signed into law on December 22, 2017.

The law has changed several aspects of the tax code and will change the way taxpayers file their future tax returns.

The Tax Cuts and Jobs Act will not go in to effect until January 1, 2018.

The number of tax brackets have remained the same, seven. Most tax brackets have seen a decrease in the amount of income taxed. Each bracket after the initial 10% tax bracket is affected. The 15% bracket is now 12% and the top tax bracket the prior 39.6% is now 37%.

Standard deductions have increased for all taxpayers.

Single taxpayers standard deduction has raised from $6,350 to $12,000.

Head of household taxpayers standard deduction has raised from $9,350 to $16,000.

Married filing jointly taxpayers standard deduction has raised from $12,700 to $24,000.

Personal and dependency exemptions have been eliminated. The child tax credit has been raised from $1,000 to $2,000 per child. The refundable child tax has been raised from $1,000 to $1,400 per child. A $500 credit is available for other dependents.

A lot of itemized deductions have been reduced or eliminated. The state income and local property tax deduction has been capped at $10,000. Mortgage interest is deductible on the first $750,000 of indebtedness for principal residences and second homes. Home equity loan interest is no longer deductible unless the funds were used for home improvements.

All miscellaneous deductions subject to the 2% income floor, unreimbursed employee expenses, tax preparation fees, investment advisory fees have been eliminated.

Finally in 2019, the individual mandate (the health insurance penalty) of the Affordable Care Act will be eliminated.

Are you expecting a tax refund from the Internal Revenue Service this year? If you file a complete and accurate paper tax return, your refund should be issued in about six to eight weeks from the date IRS receives your return. If you file your return electronically, your refund should be issued in about half the time it would take if you filed a paper return — even faster when you choose direct deposit.

You may not receive your refund as quickly as you expected. A refund can be delayed for a variety of reasons. For example, a name and Social Security number listed on the tax return may not match the IRS records. You may have failed to sign the return or to include a necessary attachment, such as Form W-2, Wage and Tax Statement. Or you may have made math errors that require extra time for the IRS to correct.

To check the status of an expected refund from the IRS, use the interactive tool available here with the IRS.

Simple online instructions guide you through a process that checks the status of your refund after you provide identifying information from your tax return. Once the information is processed, results could be one of several responses.

To check the status of an expected refund from Missouri, use the state's secure site, Missouri.

To check the status of an expected refund from Arkansas, use the state's secure site, Arkansas.

You've discovered an error after your tax return has been filed. You may need to amend your return.

The IRS usually corrects math errors or requests missing forms (such as W-2s) or schedules. In these instances, do not amend your return. However, do file an amended return if any of the following were reported incorrectly:

  • Your filing Status
  • Your total income
  • Your deductions or credits
You generally must file to claim a refund within three years from the date you filed your original return, or within two years from the date you paid the tax, whichever is later.

To check the status of an amended return from the IRS, use the interactive tool available here with the IRS.

Please contact us for more information.
If you're trying to beat the tax deadline, there are several options for last-minute help. If you find you need more time to finish your return, you can get a six month extension of time. If you have trouble paying your tax bill, the IRS has several payment options available.

The extension will give you extra time to get the paperwork to the IRS, but it does not extend the time you have to pay any tax. You have to make an accurate estimate of any tax due when you request an extension. You can also send a payment for the expected balance due, but this is not required to get the extension. However, you will owe interest on any amounts not paid by the April 17, 2018 deadline, plus a late payment penalty if you have paid less than 90 percent of your total tax by that date.
If you can't meet the April 17, 2018 deadline to file your tax return, you can get an automatic six-month extension of time to file with the IRS. The extension will give you extra time to file with the IRS, but it does not extend the time you have to pay any tax due. You will owe interest on any amounts not paid by the April deadline, plus a late payment penalty if you have paid less than 90 percent of your total tax by that date.

You must make an accurate estimate of any tax due when you request an extension. You may also send a payment for the expected balance due, but this is not required to obtain the extension.

Please contact us for more detailed information on how we can file your extension.

Millions of Americans forgo critical tax relief each year by failing to claim the Earned Income Tax Credit (EITC), a Federal tax credit for individuals who work but do not earn high incomes. Taxpayers who qualify and claim the credit could pay less federal tax, pay no tax and get a tax refund.

Last year, an estimated 21 million taxpayers received approximately $37.5 billion in EITC. However, the IRS estimates that 25 percent of people who qualify don't claim the credit and at the same time, there are millions of Americans who have claimed the credit in error, many of whom simply don't understand the requirement.

EITC is based on the amount of your earned income and the number of qualifying children in your household. If you have children, they must meet certain critera. You must file a tax return to claim the credit.

Taxpayers should consider claiming tax credits for which they might be eligible when completing their Federal income tax returns. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are refundable – taxes could be reduced to the point that a taxpayer would receive a refund rather than owing. Below are some of the credits taxpayers could be eligible to claim:

  • Earned Income Tax Credit
  • Child Tax Credit
  • Child and Dependent Care Credit
  • Adoption Credit
  • Credit for the Elderly and Disabled
  • Education Credits
  • Retirement Savings Contribution Credit
There are other credits available to eligible taxpayers. Please contact us, we may be able to offer advice.
The tax code provides tax incentives for families who are paying higher education costs or repaying student loans. You may be able to claim the American Opportunity Credit or Lifetime Learning Credit for qualified tuition and related expenses of the students in your family (i.e. you, your spouse, or dependent) who are enrolled in eligible educational institutions. Different rules apply to each credit and the ability to claim the credit can phase out at higher income levels.

You may be able to deduct interest paid on a qualified student loan. The deduction is claimed as an adjustment to income. However, this deduction is also phased out at higher income levels.

Taxpayers who refinanced their homes may be eligible to deduct some costs associated.

Generally, for taxpayers who itemize, the “points” paid to obtain a home mortgage may be deductible as mortgage interest. Points paid to obtain an original home mortgage can be, depending on circumstances, fully deductible in the year paid. However, points paid solely to refinance a home mortgage usually must be deducted over the life of the loan.

However, if part of the refinanced mortgage money was used to finance improvements to the home and if the taxpayer meets certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid. Also, if a homeowner is refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible at pay off.

Other closing costs — such as appraisal fees and other non-interest fees — generally are not deductible. Additionally, the amount of Adjusted Gross Income (AGI) can affect the amount of deductions that can be taken.
If you sold your main home, you may be able to exclude up to $250,000 of gain ($500,000 for married taxpayers filing jointly) from your federal tax return. This exclusion is allowed each time that you sell your main home, but generally no more frequently than once every two years.

To be eligible for this exclusion, your home must have been owned by you and used as your main home for a period of at least two out of the five years prior to its sale. You also must not have excluded gain on another home sold during the two years before the current sale.

If you do not meet the ownership and use tests, you may be allowed to exclude a reduced maximum amount of the gain realized on the sale of your home if you sold your home due to health, a change in place of employment, or other hardships. Hardships include, for example, divorce or legal separation, natural or man-made disaster resulting in a casualty to your home, or an involuntary conversion of your home.
Do you work at a hair salon, barber shop, golf course, hotel or restaurant or drive a taxicab? The tip income you receive as an employee from those services is taxable income.

As taxable income, these tips are subject to Federal income, Social Security and Medicare taxes, and may be subject to state income taxes.

You must keep a running daily log of all your tip income and tips paid out. This includes cash that you receive directly from customers, tips from credit card charges from customers that your employer pays you, the value of any non-cash tips such as tickets or passes that you receive, and the amount of tips you paid out to other employees through tip pools or tip splitting and the names of those employees.

If you receive $20 or more in tips in any one month, you should report all your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes and to report the correct amount of your earnings to the Social Security Administration (which will affect your benefits when you retire or if you become disabled, or your family's benefits). Contact us so your wages are properly reported.
You can include only the medical and dental expenses you paid this year, regardless of when the services were provided. If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment.

If you did not claim a medical or dental expense that would have been deductible in an earlier year, you can file Form 1040X, Amended U.S. Individual Income Tax Return, for the year in which you overlooked the expense. Do not claim the expense on this year's return. Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later.

You cannot include medical expenses that were paid by insurance companies or other sources. This is true whether the payments were made directly to you, to the patient, or to the provider of the medical services.

You cannot deduct health insurance premiums or reimbursements from your Section 125 Cafeteria Plan that you paid through your employment. Also, you cannot deduct qualified medical expenses reimbursed through your Health Savings Account (HSA).

To find qualifed medical expenses, please click on the link Qualified Medical Expenses. This is a partial list. If you have a specific expense, please contact us for more information.
Did you know that you may be able to deduct certain taxes on your federal income tax return? Deductions decrease the amount of income subject to taxation. There are four types of deductible non-business taxes:

  • State and local income taxes, or general sales taxes;
  • Real estate taxes;
  • Personal property taxes; and
  • Foreign income taxes.
You can deduct any estimated taxes paid to state or local governments and any prior year's state or local income tax as long as they were paid during the tax year. If deducting sales taxes instead, you may deduct actual expenses or use optional tables provided by the IRS to determine your deduction amount, relieving you of the need to save receipts. Sales taxes paid on motor vehicles and boats may be added to the table amount, but only up to the amount paid at the general sales tax rate.

Deductible real estate taxes are usually any state, local, or foreign taxes on real property. If a portion of your monthly mortgage payment goes into an escrow account and your lender periodically pays your real estate taxes to local governments out of this account, you can deduct only the amount actually paid during the year to the taxing authorities. Your lender will normally send you a Form 1098, Mortgage Interest Statement, at the end of the tax year with this information.

To claim a deduction for personal property tax you paid, the tax must be based on value alone and imposed on a yearly basis.
When preparing to file your federal tax return, don't forget your contributions to charitable organizations, 501(c)3. Your donations can add up to a nice tax deduction for your corporation (if you are a member of a flow-through business entity) or your personal taxes if you itemize.

Here are a few tips to help make sure your contributions pay off on your tax return:
You cannot deduct contributions made to specific individuals, political organizations and candidates, the value of your time or services and the cost of raffles, bingo, or other games of chance.

To be deductible, contributions must be made to qualified organizations.

Organizations can tell you if they are qualified and if donations to them are deductible. Taxpayers can also search the Exempt Organizations Select Check online tool, to check that an organization is qualified. Be sure to have the organization's correct name and its headquarters location, if possible. Churches and governments are not required to apply for this exemption in order to be qualified.

To check the status of a qualifed organization, use the IRS site, Charitable Status.

If you gave any one person gifts valued at more than $14,000 in 2017 or $15,000 in 2018, it is necessary to report the total gift to the Internal Revenue Service. You may have to pay tax on the gift.

The person who received your gift does not have to report the gift to the IRS or pay either gift or income tax on its value.

You make a gift when you give property, including money, or the use of or income from property, without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift.

Newlyweds and the recently divorced should make sure that names on their tax returns match those registered with the Social Security Administration (SSA). A mismatch between a name on the tax return and a Social Security number (SSN) could cause your tax return to be rejected by the IRS.

If you owed tax last year or received a large refund you may want to adjust your tax withholding. Owing tax at the end of the year could result in penalties being assessed. On the other end, if you had a large refund you lost out on having the money in your pocket throughout the year. Changing jobs, getting married or divorced, buying a home or having children can result in changes in your tax calculations.

The IRS withholding calculator on IRS.gov can help compute the proper tax withholding. The worksheets in Publication 505, Tax Withholding and Estimated Tax can also be used to do the calculation. If the result suggests an adjustment is necessary, you can submit a new W-4, Withholding Allowance Certificate, to your employer.
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 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.

Starting in 2014 the individual shared responsibility provision calls for each individual to have qualifying health care coverage, known as minimum essential coverage, for each month, qualify for an exemption, or make a payment when filing your Federal income tax return.

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 payment if the dependent does not have coverage or an exemption.

If a taxpayer does not have health care coverage and not qualify for an exemption, there is a penalty to be paid at the time you file your tax return. The penalty for 2017 is the greater of:

  • 2.5% of your yearly household income
  • $695 per person for the year ($347.50 per child under 18). The maximum penalty per family using this method is $975

    For more information, please go to Healthcare.gov.


  • Looking for ways to avoid the last-minute rush for doing your taxes? The IRS offers these tips:

    • Don't Procrastinate. Resist the temptation to put off your taxes until the 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.
    • Organize Your Tax Records. Tax preparation time can be significantly reduced if you develop a system for organizing your records and receipts. Start with the income, deduction or tax credit items that were on last year's return.
    • Visit the IRS Online. Millions of taxpayers visited the IRS Web site last year, downloading nearly 600 million forms, publications and a variety of topic-oriented tax information. Anyone with Internet access can find tax law information and answers to frequently asked tax questions.

      IRS


    • Have your CPA Double-Check Your Math and Data Entries. Review your return for possible math errors and make sure you have provided the names and correct (and legibly written) Social Security or other identification numbers for yourself, your spouse and your dependents.
    • Have Your Refund Deposited Directly to Your Bank Account. Another way to speed up your refund and reduce the chance of theft is to have the amount deposited directly to your bank account. Make sure the numbers you enter are correct. Wrong numbers can cause your refund to be misdirected or delayed.
    • 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, either as part of an electronic return or directly through a processing agent, either by phone or online. 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 17, 2018 due date, with no fee. Note that if you file your tax return or a request for a filing extension on time, even if you can't pay, you avoid potential late filing penalties.
    • Have Your CPA Request an Extension of Time to File — But Pay on Time. If the clock runs out, you can get an automatic six-month extension of time to file to October 15. However, an extension of time to file does not give you an extension of time to pay.
    Contact Us Today.