Tax season 2017 is in full swing. Statistics issued by the IRS showed a 17.2% decline in the total number of returns received through February 10, 2017 compared to the same period last year. The decline was most likely caused by the mandate on refunds on returns involving the Earned Income Credit and the Additional Child Tax Credit be held until February 15, 2017. No reason to file early if you are not able to receive your refund.
If you haven’t filed yet, you need to gather your W-2s, 1099s, and other records and schedule a meeting with your tax preparer. The due date for 2016 Federal individual tax returns is April 18, 2017 because April 15 falls on a Saturday and the Emancipation Day holiday in the District of Columbia is Monday, April 17.
Changes in Family = Changes in Taxes
If you have had any family changes during 2016, it will have an impact on your tax return. For example, if you had a baby in 2016, you will most likely be entitled to an additional dependency exemption and the child tax credit. If you paid for child care while you and your spouse worked, you may be eligible for the dependent care credit. If your spouse died in 2016, you are still eligible to file married filing jointly for 2016; however, be aware your filing status most likely will change to single in 2017 and subsequent years. Single filing status is not as beneficial as married filing jointly, so you may need to consider making estimated tax payments during 2017 or increase the taxes withheld from your income. Getting married, even on New Year’s Eve, will change your filing status from single to married.
Children going off to college is another life change with tax benefits. Full time students are eligible for the American Opportunity Tax Credit, up to $2500 per year, for the first four years of higher education, subject to income limitations and other qualifications.
Individual Retirement Account contributions need to be made on or before April 18, to qualify as a deduction on your 2016 tax return. The IRS will allow taxpayers to have their income tax refund direct deposited into an IRA by specifying the bank routing number and the IRA account number on the electronically filed tax return. If you file early enough, you may get your refund before April 18 and use the refund to fund your 2016 IRA contribution. However, if you use this approach, you will need to tell your banker the contribution is an IRA contribution for 2016 and not 2017.
Rules for making a deductible IRA contribution depend on your income level and your participation in an employer sponsored retirement plan. In general, if you do not participate in an employer sponsored plan and you have earnings from a job or self-employment in excess of the contribution amount, you can make a deductible IRA contribution of $5,500, or $6,500 if you are 50 years old or older.
Filing for an extension
If you are not able to complete your individual tax return by April 18, you must file an extension request using IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Timely filing an extension request will give you an additional six months to file your tax return. However, the extension request does not extend the time to pay your tax. Before you file your extension request, prepare an estimate of the amount of tax you will owe and pay this amount with the Form 4868. Interest and penalties will accrue on any unpaid taxes after April 18. The best way to minimize any interest or penalties is to pay in the amount you believe you will owe, then file your tax return as soon as possible after the April due date.
If you made gifts over the $14,000 annual exclusion amount in 2016, you will be required to file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. Filing Form 4868 will automatically extend the due date of the gift tax return, but not the due date of any gift taxes due.
Expecting a Refund?
The easiest way to check the status of your refund is online through the “Where’s My Refund?” tool at IRS.gov or using the IRS2Go mobile app. You will need your Social Security number, filing status, and the exact refund amount. You can check the status of your refund within 24 hours after e-filing your tax return, or 4 weeks after mailing your paper return.