Congress uses tax deductions and tax credits to influence taxpayers’ actions. For instance, it seeks to stimulate taxpayers to reduce their energy consumption and moving away from the use of fossil fuels. In this article, we explore the benefits and drawbacks of two major incentives: the home-solar credit and the electric-vehicle credit.
Tax credits come in two types: refundable and nonrefundable. Refundable tax credits apply even for taxpayers who owe no tax. On the other hand, nonrefundable tax credit can only offset actual tax liability; any excess is lost (or, in some cases, carried over for a limited number of years until used up).
If you aren’t one of those lucky Americans who gets a tax refund from the IRS, you might be wondering how you go about paying your balance due. Here are some electronic and manual payment options that you can use to pay your federal income tax.
If your 2018 federal return has already been filed and you are due a refund, you can check the status of your refund online.
“Where’s My Refund?” is an interactive tool on the IRS website at IRS.gov. Whether you have opted for direct deposit into one account, split your refund among several accounts, or asked the IRS to mail you a check, “Where’s My Refund?” will give you online access to your refund information nearly 24 hours a day, 7 days a week.
Have you received all of your W-2s? These documents are essential for completing individual income tax returns, as they include the taxable amount of your wages and the amount withheld for federal and (if applicable) state income tax, along with pension plan and other information that is needed to prepare your return. Employers have until January 31st to provide or send you your W-2 earnings statement covering what you earned in the prior year, either electronically or in paper form. If you have not received your W-2 in a reasonable time frame (allowing for time for mail delivery) after the January 31 due date, follow these steps as outlined in this weeks article.
If your tax refund is less than you anticipated, you are not alone. In a report issued by the Treasury Department on February 14, the average refund it is paying in 2019 has dropped to $1,949 from $2,135 in the prior year. In addition, the number of returns filed so far has dropped from 13.5 million last year to 11.4 million this year for the same period.
With all the hype about how tax reform would reduce taxes, taxpayers were anticipating larger refunds this year but instead are receiving less, on average. This has left the Republican lawmakers who passed the tax reform scrambling to explain why the refunds are lower.
Thanks to the tax reform, beginning in 2019, the penalty for not having adequate health insurance, which the government refers to as the “individual shared responsibility payment,” will no longer apply.
The elimination of this penalty as of 2019 does not impact the health care subsidy for low-income families, which is known as the premium tax credit and which is available for policies acquired through a government insurance marketplace. This elimination also does not affect the penalties assessed on employers that do not offer affordable insurance to employees and that have 50 or more full-time-equivalent employees.
However, the penalty still applies for individual taxpayers who did not have minimum essential health coverage for 2018 and is the greater of the sum of the family’s flat dollar amounts or 2.5% of the amount by which the household’s income exceeds the income-tax-filing threshold.
As part of the recent tax reform, the Tax Cuts and Jobs Act of 2017, the deduction for home mortgage interest and property taxes has undergone substantial alterations. These changes will impact most homeowners who itemize their deductions each year. Please read this article for more information as it pertains to your situation.
To ensure individuals properly report all of their income, the IRS has an ever-expanding series of information-reporting forms used to advise you and the IRS of your wages, retirement plan income, Social Security benefits, health insurance premium subsidies, stock sales, investment income, etc., for each tax year. The issuers of most of these forms have until January 31 following the year to which they apply to mail them to you or make them available to you online, so they should arrive in your hands soon thereafter. These forms are not only sent to you but are also provided to the IRS and state taxing agencies, when applicable. The IRS and states use them to verify that you are properly preparing your tax return(s). If you fail to correctly account for the information, you can expect to hear from the IRS or your state tax department in a year or so. Here is a rundown on the most frequently encountered of these documents:
You know the old line about the inevitability of death and taxes? It’s still true. What isn’t inevitable, however, is the need to pay penalties to the IRS. It happens, but it doesn’t have to, and the main reason that it does is because taxpayers don’t educate themselves about the rules. When you get hit with an IRS penalty, it adds on to a number that you already wish you didn’t have to pay.
To ensure that you get through tax season without unnecessary costs and aggravation, here’s a list of the tax penalties that the IRS most frequently assesses against taxpayers.
Ever since tax reform was passed, over a year ago, taxpayers have been uncertain whether rental property will be classified as a trade or business for purposes of qualifying for the new IRC Sec 199A 20% pass-through deduction (commonly referred to as the 199A deduction).
Finally, on January 18, 2019, the IRS issued a notice which provided “safe harbor” conditions under which a rental real estate activity will be treated as a trade or business for purposes of the 199A deduction.
It’s important to note that this notice prescribes several conditions that must be met for a rental real estate enterprise (a tax term introduced by the IRS in this notice) to be deemed to be a trade or business and eligible for the section 199A 20% deduction. For purposes of this safe harbor, a rental real estate enterprise is defined as an interest in real property held for the production of rents and may consist of an interest in multiple properties.