January has arrived, and we CPA’s and Bookkeepers are ready for tax season. Are you? You may have until April to get everything filed, but the time to get ready is now. The sooner the better, really. For many, tax season is much more than just filing a w2 online. It can take months of preparation, so let’s see if you are where you need to be. Here is a list of some things you may need to consider before filing this year.
Make Sure Your Health Coverage is in Order
Do you know what you need to report to the IRS about your health insurance? As you probably already know, you and your family are required to have minimum essential coverage, or qualify for an exemption. If you don’t, you will be charged a penalty that goes beyond pocket change. If you were not covered, you may need to fill out quite a bit of extra paperwork to see if you qualify for Health Coverage Exemptions, or Premium Tax Credit.
Be Generous, But Careful
It’s wonderful if you have been charitable to friends and family, but hopefully you were cautious about financial gifts. The IRS requires that you file a gift tax return whenever you give someone more than $14,000 in cash, property, or gifts. The annual exclusion for gifts changes every few years, so make sure you are in the clear and don’t have to report any of your generosity.
Adjust Your Withholding
If you are expecting a large refund, you may want to change your taxes withheld on your year-to-date withholding. If you are claiming the earned income tax credit(EITC), this is especially important. By law, the IRS is required to hold all refunds on all of those types of claims until February 15th. This allows the IRS more time to discover or prevent any tax frauds.
If you are adjusting your withholding, you will need to complete Form W-4, Employee’s Withholding Allowance Certificate and submit it to your employer.
Prevent Identity Theft
Your Identity Protection PIN needs to be provided on your tax return. Make sure you know the number, and submit it so the IRS will accept your return. The number is meant to protect any fraudulent returns from being filed under your Social Security Number. The number changes every year, so be sure to go to the IRS website to retrieve it before you file.
EITC is Your Friend
Many people forget to claim the earned income tax credit. In 2016 the limit of earned income to qualify for EITC was $53, 505. If you worked and earned less than that, you don’t want to miss out on this credit. The IRS reports that one out of every five workers forgets all about the EITC. There is an EITC Assistant tool on the IRS website to help you determine your eligibility.
Remember that you don’t have to go through tax season alone. The team at Margo’s is here to hold your hand through the filing process. We work with you directly to make sure you have all information correct in order for you to receive your maximum return. Please call us if you have any questions about filing for 2016.