Homeowners may qualify to exclude from their income all or part of any gain from the sale of their main home.
Below are tips to keep in mind when selling a home: Ownership and Use. To claim the exclusion, the homeowner must meet the ownership and use tests. This means that during the five-year period ending on the date of the sale, the homeowner must have:
Loss. A main home that sells for lower than purchased is not deductible. Reporting a Sale. Reporting the sale of a home on a tax return is required if all or part of the gain is not excludable. A sale must also be reported on a tax return if the taxpayer chooses not to claim the exclusion or receives a Form 1099-S, Proceeds from Real Estate Transactions. Possible Exceptions. There are exceptions to the rules above for persons with a disability, certain members of the military, intelligence community and Peace Corps workers, among others. More information is available in Publication 523, Selling Your Home. Worksheets. Worksheets are included in Publication 523, Selling Your Home, to help you figure the:
Items to Keep In Mind:
Avoid scams. The IRS does not initiate contact using social media or text message. The first contact normally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.
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The Internal Revenue Service today encouraged taxpayers to consider checking their tax withholding, keeping in mind several factors that could affect potential refunds or taxes they may owe in 2018.
Reviewing the amount of taxes withheld can help taxpayers avoid having too much or too little federal income tax taken from their paychecks. Having the correct amount taken out helps to move taxpayers closer to a zero balance at the end of the year when they file their tax return, which means no taxes owed or refund due. During the year, changes sometimes occur in a taxpayer’s life, such as in their marital status, that impacts exemptions, adjustments or credits that they will claim on their tax return. When this happens, they need to give their employer a new Form W-4, Employee’s Withholding Allowance Certificate, to change their withholding status or number of allowances. Employers use the form to figure the amount of federal income tax to be withheld from pay. Making these changes in the late summer or early fall can give taxpayers enough time to adjust their withholdings before the tax year ends in December. The withholding review takes on even more importance now that federal law requires the IRS to hold refunds a few weeks for some early filers claiming the Earned Income Tax Credit and the Additional Child Tax Credit. In addition, the steps the IRS and state tax administrators are now taking to strengthen protections against identity theft and refund fraud mean some tax returns could face additional review time next year. So far in 2017, the IRS has issued more than 106 million tax refunds out of the 142 million total individual tax returns processed, with the average refund well over $2,700. Historically, refund dollar amounts have increased over time. Making a Withholding Adjustment In many cases, a new Form W-4, Employee’s Withholding Allowance Certificate, is all that is needed to make an adjustment. Taxpayers submit it to their employer, and the employer uses the form to figure the amount of federal income tax to be withheld from their employee’s pay. The IRS offers several online resources to help taxpayers bring taxes paid closer to what they owe. They are available anytime on IRS.gov. They include:
Spring showers bring summer flowers and weddings typically aren’t far behind. Newlyweds have a lot to think about and taxes might not be on the list. However, there is good reason for a new couple to consider how the nuptials may affect their tax situation.
The IRS has some tips to help in the planning:
The Internal Revenue Service today issued a warning that tax-related scams continue across the nation even though the tax filing season has ended for most taxpayers. People should remain on alert to new and emerging schemes involving the tax system that continue to claim victims. “We continue to urge people to watch out for new and evolving schemes this summer,” said IRS Commissioner John Koskinen. “Many of these are variations of a theme, involving fictitious tax bills and demands to pay by purchasing and transferring information involving a gift card or iTunes card. Taxpayers can avoid these and other tricky financial scams by taking a few minutes to review the tell-tale signs of these schemes.” EFTPS Scam A new scam which is linked to the Electronic Federal Tax Payment System (EFTPS) has been reported nationwide. In this ruse, con artists call to demand immediate tax payment. The caller claims to be from the IRS and says that two certified letters mailed to the taxpayer were returned as undeliverable. The scammer then threatens arrest if a payment is not made immediately by a specific prepaid debit card. Victims are told that the debit card is linked to the EFTPS when, in reality, it is controlled entirely by the scammer. Victims are warned not to talk to their tax preparer, attorney or the local IRS office until after the payment is made. “Robo-call” Messages The IRS does not call and leave prerecorded, urgent messages asking for a call back. In this tactic, scammers tell victims that if they do not call back, a warrant will be issued for their arrest. Those who do respond are told they must make immediate payment either by a specific prepaid debit card or by wire transfer. Private Debt Collection Scams The IRS recently began sending letters to a relatively small group of taxpayers whose overdue federal tax accounts are being assigned to one of four private-sector collection agencies. Taxpayers should be on the lookout for scammers posing as private collection firms. The IRS-authorized firms will only be calling about a tax debt the person has had – and has been aware of – for years. The IRS would have previously contacted taxpayers about their tax debt. Scams Targeting People with Limited English Proficiency Taxpayers with limited English proficiency have been recent targets of phone scams and email phishing schemes that continue to occur across the country. Con artists often approach victims in their native language, threaten them with deportation, police arrest and license revocation among other things. They tell their victims they owe the IRS money and must pay it promptly through a preloaded debit card, gift card or wire transfer. They may also leave “urgent” callback requests through phone “robo-calls” or via a phishing email. Tell Tale Signs of a Scam: The IRS (and its authorized private collection agencies) will never:
How to Know It’s Really the IRS Calling or Knocking The IRS initiates most contacts through regular mail delivered by the United States Postal Service. However, there are special circumstances in which the IRS will call or come to a home or business, such as:
Methods to Change Your Address
Mail your signed statement to the address where you filed your last return.
If you filed a joint return, and are still residing with your spouse, both you and your spouse should sign the form or statement. If you filed a joint return and you now have separate addresses, each of you should notify us of your new, separate address. Authorized representatives filing a form or written statement to change an address for a taxpayer must attach a copy of their power of attorney or Form 2848, Power of Attorney and Declaration of Representative. Unauthorized third parties can't change a taxpayer's address. Changes of address through the U.S. Postal Service (USPS) may update your address of record on file with us based on what they retain in their National Change of Address (NCOA) database. However, even when you notify the USPS, not all post offices forward government checks, so you should still notify us. For changes of address relating to an employment tax return, we issue confirmation notices (Notices 148A and 148B) for the change to both the new and former address. It can take four to six weeks for a change of address request to fully process. If you're an individual taxpayer, you can use this tool to view:
More than 78 million taxpayers paid someone to prepare their federal tax return in 2016. Generally, anyone who prepares or assists in preparing a federal tax return for compensation must have a Preparer Tax Identification Number (PTIN). They must sign in the paid preparer's area of the return and give the taxpayer a copy of the return. Since 2012, anyone who prepares and files 11 or more Forms 1040, 1040A, 1040EZ or 1041 during a calendar year must use e-file. Most tax return preparers provide outstanding service, but they have differing levels of skills, education and expertise. Another important difference is their ability to represent taxpayers before the Internal Revenue Service. Representation rights, also known as practice rights, fall into two categories: Unlimited and LimitedRepresentation. Return preparers with unlimited representation rights can represent their clients on any matters including audits, payment/collection issues, and appeals. Those with limited representation rights can only represent clients whose returns they prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees, including the Taxpayer Advocate Service. Credentialed Return Preparers Tax return preparers with unlimited representation rights include professionals with the following credentials:
Annual Filing Season Program The IRS recognizes the efforts of non-credentialed return preparers who aspire to a higher level of professionalism. To that end, the IRS issues an Annual Filing Season Program Record of Completion to return preparers who obtain 18 hours of continuing education for a specific tax year that includes a six-hour federal tax law refresher course with a test. Return preparers who participate in the Annual Filing Season Program have limited representation rights and may represent clients whose returns they prepared and signed, but only before revenue agents, customer service representatives and similar IRS employees, including the Taxpayer Advocate Service. They must participate in the Annual Filing Season Program in both the year of return preparation and the year of representation. They cannot represent clients whose returns they did not prepare. They cannot represent clients regarding appeals or collection issues even if they did prepare the return in question. Non-credentialed return preparers who do not participate in the Annual Filing Season Program may prepare and file federal tax returns, but cannot represent clients before the IRS. Researching Tax Return Preparers The IRS has a searchable, sortable public directory on IRS.gov to research tax return preparers. This directory contains only those with a valid PTIN who hold a professional credential or have obtained an Annual Filing Season Program Record of Completion from the IRS. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications contains the name, city, state and zip code of credentialed preparers and Annual Filing Season Program participants. Taxpayers can also research the type of credentials or qualifications held by a specific tax professional. The listings do not serve as an endorsement by the IRS. Tax Professionals with Specialized Credentials In addition to attorneys, CPAs and enrolled agents, the IRS recognizes the credentials of two other types of specialized tax professionals who are included in the Directory of Federal Tax Return Preparers. They include:
The IRS suggests taxpayers always check their tax return preparer’s qualifications and history. Ask about Service Fees before providing records and receipts needed to allow the preparer to determine taxable income, deductions and credits. Do not use a preparer who will e-file a return using only a pay stub instead of a Form W-2. Taxpayers should review the return and ask questions before signing because they are responsible for the information on the tax return, no matter who prepared it. Make a Complaint about a Tax Return Preparer Most paid tax return preparers are professional, honest and trustworthy and the IRS is committed to investigating those who act improperly. Taxpayers can Make a Complaint About a Tax Return Preparer for misconduct, such as:
The IRS will begin to release EITC/ACTC refunds starting Feb. 15. However, the IRS cautions taxpayers that these refunds likely won’t arrive in bank accounts or debit cards until the week of February 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. Where's My Refund? on IRS.gov and the IRS2Go mobile app will be updated with projected deposit dates for early EITC /ACTC refund filers a few days after Feb. 15. Taxpayers will not see a refund date on Where's My Refund? or through their software packages until then. The IRS, tax preparers and tax software will not have additional information on refund dates, so Where’s My Refund? remains the best way to check the status of a refund. Why is my refund being held? Beginning in 2017, if you claim the EITC or ACTC on your tax return, the IRS must hold your refund until Feb. 15. This new law requires the IRS to hold the entire refund — even the portion not associated with the EITC or ACTC. Like previous years, some tax refunds may be held if there are questions about the tax return or the IRS needs more information. Will I get my refund on Feb. 15? While the IRS will begin to issue EITC/ACTC refunds starting Feb. 15, you should not count on actually seeing your refund until the week of Feb. 27 -- if you chose direct deposit or a debit card and there are no processing issues with your tax return. Why does it take so long for the funds to show up in my account? It takes additional time for refunds to be processed after leaving the IRS, and for financial institutions to accept and deposit them to bank accounts and products like debit cards. Also many financial institutions do not process payments on weekends or holidays, which can affect when refunds reach taxpayers. For EITC and ACTC filers, the three-day holiday weekend involving President’s Day affects their refund timing. How do I check the status of my refund? Where's My Refund on IRS.gov and the IRS2Go mobile app remains the best way to check the status of a refund. Where’s My Refund will be updated with projected deposit dates for early EITC and ACTC refund filers a few days after Feb. 15. Taxpayers will not see a refund date on Where's My Refund or through their software packages until then. The IRS, tax preparers and tax software will not have additional information on refund dates, so taxpayers should not contact or call them about refunds before the end of February. here to edit. Do you want to save more this year? If so, you're not alone. Fifty-five percent of Americans listed “saving more money” as their top financial resolution for 2016, versus 20% who were looking to pay down debt, according to Fidelity’s Financial Resolutions Study.
So, are you saving enough—and saving smart enough? We suggest setting aside three to six months of expenses in an emergency fund. But after that, we believe saving for retirement should be most Americans’ top priority. After all, you can probably get loans to pay for children’s education, or for a house, a car, or for other financial goals. But beyond your Social Security retirement benefit, you’ll likely need to fund your own retirement paycheck. Here are eight tips, not necessarily in order, to help you save more and smarter this year. Depending on your situation, you might consider some or all of these. Take full advantage of any company match. If you have a 401(k), 403(b), or 457(b) plan and your employer offers a matching contribution, take full advantage of it. In addition to receiving the company match, you get the added potential benefits of any tax-deferred growth and compounding returns. Let's say, hypothetically, your company offers a match of 50¢ on every $1 you contribute, up to 3% of your salary. If you make $60,000 a year and contribute 3%, or $1,800, and your company kicks in another $900, your annual contribution could add up to $2,700. Assuming a hypothetical compound annual growth rate of 7%, your savings could grow to more than $37,000 in ten years.2 Contribute the maximum to your workplace savings plan. Saving just 3% a year is probably not enough to generate the savings you will need to retire, which could be hundreds of thousands of dollars or more for even basic expenses. So, try to contribute the maximum to your workplace savings plan each year. For 2016, the maximum is $18,000; $24,000 if you are age 50 or older. If you’re not quite saving to the max yet, consider increasing your savings rate by 1% per year until you reach a total savings rate of 15%. For details, read Viewpoints: “Just 1% more can make a big difference.”) If you think your tax rate will be higher in retirement than it is now, consider opting for a Roth workplace savings plan, if your employer offers one. With a Roth, you contribute after-tax dollars, but any earnings and dividends grow tax free, and withdrawals are also tax free if taken in retirement. To learn more, read Viewpoints: “Roth or traditional IRA or 401(k)—two tips for choosing.” Pay down high-interest debt. If you are paying more than 8% to 10% on credit card or other debt, consider using any extra savings to pay down the balance. If you have multiple accounts, you should work on the one with the highest interest rate first. Continue to make the minimum required payments on other debts (so you don't get hit with any penalties). When that first debt is paid off, consider putting your extra money toward paying off the one with the next-highest interest rate, and so on. As you pay off your debts, it should become easier to pay off the remaining debts, because you’ll have lower interest payments and therefore more money to work with. Continue the process until you're out from under all your high-interest debt. For debt you cannot pay off, consider consolidating it at whichever institution offers you the lowest rate, making sure the payment schedule matches your own goals and financial situation. Contribute to an IRA. Individual retirement accounts (IRAs) offer another tax-smart way to save for retirement. There are two basic options:
Consider a health savings account. If your employer offers a high-deductible health care plan (HDHP) with a health savings account (HSA), you may want to consider electing the HDHP and opening an HSA. It can be a tax-efficient way to save and pay for current and future qualified medical expenses, including those in retirement. Although your out-of-pocket health care costs may be higher depending on your health care needs, your premiums may be lower. Also, many companies contribute to an employee’s HSA, and employee contributions are made pretax, which means your net after-tax costs can be lower. And what you don’t spend in your HSA in one year can be carried over from year to year to cover future qualified medical expenses, including those in retirement. HSAs have a unique triple tax advantage3 that can make them a powerful savings vehicle for qualified medical expenses in current and future years: Contributions, earnings, and withdrawals are tax free for federal tax purposes To make the most of your HSA (if you have access to one and you can afford it), consider paying for current-year qualified medical expenses out of pocket and letting your HSA contributions remain invested in your HSA to pay for future qualified medical expenses, including those in retirement. The maximum annual contribution that can be made for 2016 is $3,350 for individuals enrolled in self-only coverage and $6,750 for individuals enrolled in family coverage. In addition, individuals who are at least 55 years old, are not enrolled in Medicare, and who otherwise are eligible individuals can make an additional catch-up contribution. The maximum catch-up contribution amount is $1,000 in addition to the max annual contributions ($3,350 and $6,750). To learn more, read Viewpoints: “Three healthy habits for health savings accounts.” Consider deferring compensation. If your company offers a nonqualified deferred compensation plan—and you have maxed out on other workplace savings options and still have the means—consider allocating some of your paycheck there as well. You can decide how much to defer each year from your salary, bonuses, or other forms of compensation. Deferring this income provides two tax advantages: You don't pay income tax on that portion of your compensation in the year you defer it (you pay only Social Security and Medicare taxes), and you can invest the money, so it has the potential to grow tax deferred until you receive it. But a deferred compensation plan is not for everyone—and the rules are complex, and there are risks involved that you wouldn't face with a qualified plan—so you'll want to weigh the pros and cons carefully before signing up. To learn more, read Viewpoints: “Nonqualified deferred compensation plans.” Consider deferred variable annuities. If you’ve taken advantage of your tax-advantaged workplace savings options and contributed to an HSA and IRA but still want to save more, you might want to consider deferred variable annuities. They typically allow you to invest in funds that hold stocks and bonds—and any earnings grow tax deferred. Unlike some of the options mentioned above, there are no IRS limits on how much you can invest in an annuity.
Remember other savings goals. It’s also important not to overlook saving for your other goals, such as college and graduate school for yourself, children, or grandchildren. Among the best ways to save for a college goal is a 529 college savings account, which is a tax-advantaged account designed to pay for qualified higher education expenses. For both types of accounts, qualified distributions are federal income tax free. To learn more, read Viewpoints: “The ABC's of 529 college savings plans.” To explore saving for an education goal, use our college saving tools. One last tip: To make it easier to stay on track with your savings goals, consider using direct deposit from your paycheck to your chosen savings vehicles, be they workplace savings plans, HSAs, IRAs, annuities, or even taxable accounts. Then give yourself a pat on the back—you’re a smart saver. The Internal Revenue Service announced today that the nation’s tax season will begin Monday, Jan. 23, 2017, and reminded taxpayers claiming certain tax credits to expect a longer wait for refunds.
The IRS will begin accepting electronic tax returns that day, with more than 153 million individual tax returns expected to be filed in 2017. The IRS again expects more than four out of five tax returns will be prepared electronically using tax return preparation software. Many software companies and tax professionals will be accepting tax returns before Jan. 23 and then will submit the returns when IRS systems open. The IRS will begin processing paper tax returns at the same time. There is no advantage to filing tax returns on paper in early January instead of waiting for the IRS to begin accepting e-filed returns. The IRS reminds taxpayers that a new law requires the IRS to hold refunds claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) until Feb. 15. In addition, the IRS wants taxpayers to be aware it will take several days for these refunds to be released and processed through financial institutions. Factoring in weekends and the President’s Day holiday, the IRS cautions that many affected taxpayers may not have actual access to their refunds until the week of Feb. 27. “For this tax season, it’s more important than ever for taxpayers to plan ahead,” IRS Commissioner John Koskinen said. “People should make sure they have their year-end tax statements in hand, and we encourage people to file as they normally would, including those claiming the credits affected by the refund delay. Even with these significant changes, IRS employees and the entire tax community will be working hard to make this a smooth filing season for taxpayers.” April 18 Filing Deadline The filing deadline to submit 2016 tax returns is Tuesday, April 18, 2017, rather than the traditional April 15 date. In 2017, April 15 falls on a Saturday, and this would usually move the filing deadline to the following Monday — April 17. However, Emancipation Day — a legal holiday in the District of Columbia — will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 18, 2017. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation. “The opening of filing season reflects months and months of work by IRS employees,” Koskinen said. “This year, we had a number of important legislative changes to program into our systems, including the EITC refund date, as well as dealing with resource limitations. Our systems require extensive programming and testing beforehand to ensure we’re ready to accept and process more than 150 million returns.” |
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