Many Popular Tax Rules Now Permanent

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Frequent revisions in tax laws can make planning tough. Fortunately, a law passed late in 2015 changed some popular tax provisions from temporary to permanent. One is the American Opportunity Tax Credit, which provides a dollar-for-dollar credit of some qualified tuition and related expenses. Another is a deduction for college tuition. The rule that allows you to deduct state and local sales taxes is also now permanent, as is a deduction of up to $250 in unreimbursed classroom expenses for elementary and secondary school administrators and teachers. People over age 70½ who must take required minimum distributions from their IRAs can now depend on being able to use that money to make qualified charitable contributions if they choose—and avoid tax on the apportionment. These are just a few examples of the provisions that were made permanent.

What’s the status of the tax rules that have the most substantial impact on your return? And which tax-saving opportunities are you missing? We can help you answer these and any other questions you have about your tax situation. Contact our office today for personalized advice and information.

Are there any benefits to filing early?

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This article is part of our 2017 Tax Season FAQ Series – If you have a question submit it to FAQ@rmfcpallc.com, and it may become part of a future post.

There has always been a myth that folks who file earlier are less likely to be audited, or in particular, those who file an extension are more likely to be reviewed. Our experience and the data collected in various studies doesn’t show any connection in audit rate between those who file with an extension and those whose returns are in way ahead of the filing deadline. However, taxpayers must remember that filing for an extension does not extend the time to pay. Therefore an estimated calculation needs to made, and the full tax liability paid with the extension or penalties and interest will accrue.

But back to the original question, there are certainly benefits to filing early. Obviously, if you are due a refund the sooner you file, the sooner you will get your money back. But new laws have mandated that returns that include an Earned Income Credit or an Additional Child Credit will not have refunds issued until after February 15th.

The volume of returns the IRS is processing in late January and early February are not as high as the amount later in the filing season. So returns filed earlier may be completed by the IRS within a 7-10 day period, while returns filed at the peak of the season could see a processing time closer to 3-4 weeks long.

Still, there are reasons to be cautious about filing early. Despite our efforts there always seems to be at least one client who gets a corrected 1099 after submitting their return. Consequently, an amended return is often necessary to adjust for the additional information.

So there are certainly benefits to filing early, but there are also genuine concerns as well. In most cases, it depends on the taxpayer’s individual situation and their personal preference.

 

Documenting Your Charitable Donations

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Many people make donations to charities whose work they support, but if you are planning to take a tax deduction for your gift, you must have the proper paperwork. Assembling the right documentation can also be tricky because the requirements vary based on whether the donation is cash and on the value of your gift. If you donate less than $250 in cash, for example, a canceled check, credit card statement or similar record may be sufficient, but if you give more, you will need a written acknowledgment from the charity. An additional tax form—and possibly an appraisal—may be required for non-cash donations, depending on their value. Of course, the organization itself must also qualify as a charity under IRS rules.

We can offer advice that will make it possible for you to fund the causes you believe in and qualify for the deductions you deserve. We can also help you incorporate charitable giving into your long-term tax and estate planning. Be sure to contact us with all of your questions on charitable giving or any other financial concern.

2016 Tax Highlights

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