Taxes

Summer Newlyweds Should Also Think About Taxes

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:

  • Report changes in:
    • Name. When a name changes through marriage, it is important to report that change to the Social Security Administration. The name on a person’s tax return must match what is on file at SSA. If it doesn’t, it could delay any refund. To update information, file Form SS-5, Application for a Social Security Card. It is available on SSA.gov, by calling 800-772-1213 or at a local SSA office.
    • Address. If marriage means a change of address, the IRS and U.S. Postal Service need to know. To do that, send the IRS Form 8822, Change of Address. Notify the postal service to forward mail by going online at USPS.com or at a local post office.
  • Consider changing withholding. Newly married couples must give their employers a new Form W-4, Employee’s Withholding Allowance Certificate, within 10 days. If both spouses work, they may move into a higher tax bracket or be affected by the Additional Medicare Tax. Use the IRS Withholding Calculator at IRS.gov to help complete a new Form W-4. See Publication 505, Tax Withholding and Estimated Tax, for more information.
  • Decide on a new filing status. Married people can choose to file their federal income taxes jointly or separately each year. While filing jointly is usually more beneficial, it’s best to figure the tax both ways to find out which works best. Remember, if a couple is married as of Dec. 31, the law says they’re married for the whole year for tax purposes.
  • Select the right tax form. Choosing the right income tax form can help save money. Newly married taxpayers may find they now have enough deductions to itemize them on their tax returns. Newlyweds can claim itemized deductions on Form 1040, but not on Form 1040A or Form 1040EZ.
  • Avoid scams. The IRS will never initiate contact using social media or text message. First contact generally 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.
  • IRS YouTube Videos:

Taxpayers Should Review Their Withholding; Avoid Having Too Much or Too Little Federal Income Tax Withheld

IRS YouTube Video:

IRS Withholding Calculator: English | Spanish

WASHINGTON — 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:

Plan Ahead for Tax Time When Renting Out Residential or Vacation Property

Summertime is a time of year when people rent out their property. In addition to the standard clean up and maintenance, owners need to be aware of the tax implications of residential and vacation home rentals.

Receiving money for the use of a dwelling also used as a taxpayer’s personal residence generally requires reporting the rental income on a tax return. It also means certain expenses become deductible to reduce the total amount of rental income that’s subject to tax.

Dwelling Unit.  This may be a house, an apartment, condominium, mobile home, boat, vacation home or similar property. It’s possible to use more than one dwelling unit as a residence during the year.

Used as a Home.  The dwelling unit is considered to be used as a residence if the taxpayer uses it for personal purposes during the tax year for more than the greater of: 14 days   or 10% of the total days rented to others at a fair rental price. Rental expenses cannot be more than the rent received.

Personal Use.  Personal use means use by the owner, owner’s family, friends, other property owners and their families. Personal use includes anyone paying less than a fair rental price.

Divide Expenses. Special rules generally apply to the rental of a home, apartment or other dwelling unit that is used by the taxpayer as a residence during the taxable year. Usually, rental income must be reported in full, and any expenses need to be divided between personal and business purposes. Special deduction limits apply.

How to Report. Use Schedule E to report rental income and rental expenses on Supplemental Income and Loss. Rental income may also be subject to Net Investment Income Tax. Use Schedule A to report deductible expenses for personal use on Itemized Deductions. This includes such costs as mortgage interest, property taxes and casualty losses.

Special Rules.  If the dwelling unit is rented out fewer than 15 days during the year, none of the rental income is reportable and none of the rental expenses are deductible. Find out more about these rules; see Publication 527, Residential Rental Property (Including Rental of Vacation Homes).

 

Hobby or Business? IRS Offers Tips to Decide

Millions of people enjoy hobbies that are also a source of income. From catering to cupcake baking, crafting homemade jewelry to glass blowing — no matter what a person’s passion, the Internal Revenue Service offers some tips on hobbies.
Taxpayers must report on their tax return the income earned from hobbies. The rules for how to report the income and expenses depend on whether the activity is a hobby or a business. There are special rules and limits for deductions taxpayers can claim for hobbies. Here are five tax tips to consider:
1. Is it a Business or a Hobby? A key feature of a business is that people do it to make a profit. People engage in a hobby for sport or recreation, not to make a profit. Consider nine factors when determining whether an activity is a hobby. Make sure to base the determination on all the facts and circumstances. For more about ‘not-for-profit’ rules, see Publication 535, Business Expenses.
2. Allowable Hobby Deductions. Within certain limits, taxpayers can usually deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is appropriate for the activity.
3. Limits on Hobby Expenses. Generally, taxpayers can only deduct hobby expenses up to the amount of hobby income. If hobby expenses are more than its income, taxpayers have a loss from the activity. However, a hobby loss can’t be deducted from other income.
4. How to Deduct Hobby Expenses. Taxpayers must itemize deductions on their tax return to deduct hobby expenses. Expenses may fall into three types of deductions, and special rules apply to each type. See Publication 535 for the rules about how to claim them on Schedule A, Itemized Deductions.

Mar 28, 2017 – IRS Funding Information

The IRS releases refunds each weekday throughout the year. We provide the percentage of refunds that have not yet been funded by the IRS. We update these funding statistics at approximately 2:00pm eastern each weekday throughout the year.

As of today, the estimated percentage of refunds not yet released by the IRS are:

– for returns filed 02/12 and prior, most refunds have been released by the IRS.

– for returns filed 02/13 – 02/26, approximately 10% have not yet been released by the IRS.

– for returns filed 02/27 – 03/14, approximately 15% have not yet been released by the IRS.

– for returns filed 03/15 – 03/20, approximately 35% have not yet been released by the IRS.

– for returns filed 03/21 – 03/21, approximately 40% have not yet been released by the IRS.

– for returns filed 03/22 – 03/22, approximately 90% have not yet been released by the IRS.

– for returns filed 03/23 and beyond, the IRS has released very few refunds.

    Mar 27, 2017 – IRS Funding Information

The IRS releases refunds each weekday throughout the year. We provide the percentage of refunds that have not yet been funded by the IRS. We update these funding statistics at approximately 2:00pm eastern each weekday throughout the year.

As of today, the estimated percentage of refunds not yet released by the IRS are:

– for returns filed 02/12 and prior, most refunds have been released by the IRS.

– for returns filed 02/13 – 02/26, approximately 10% have not yet been released by the IRS.

– for returns filed 02/27 – 03/07, approximately 15% have not yet been released by the IRS.

– for returns filed 03/08 – 03/12, approximately 25% have not yet been released by the IRS.

– for returns filed 03/13 – 03/13, approximately 30% have not yet been released by the IRS.

– for returns filed 03/14 – 03/14, approximately 35% have not yet been released by the IRS.

– for returns filed 03/15 – 03/15, approximately 60% have not yet been released by the IRS.

– for returns filed 03/16 – 03/20, approximately 65% have not yet been released by the IRS.

– for returns filed 03/21 – 03/21, approximately 95% have not yet been released by the IRS.

– for returns filed 03/22 and beyond, the IRS has released very few refunds.

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NATP

National Association of Tax Professionals