One thing to notice in the 2018 tax changes is that the so-called marriage penalty is almost absent, except for couples earning more than $400,000.
Have these documents ready: Social security numbers and birth dates; An Individual Taxpayer Identification Number letter if the taxpayer has one in lieu of a Social Security number; The prior-year return; A copy of the tax return in question; Any IRS letters or notices received by the taxpayer.
Age Rules. Taxpayers must be under age 70½ at the end of the tax year to contribute to a traditional IRA. There is no age limit to contribute to a Roth IRA.
Compensation Rules. A taxpayer must have taxable compensation to contribute to an IRA. This includes income from wages and salaries and net self-employment income. It also includes tips, commissions, bonuses and alimony. If a taxpayer is married and files a joint tax return, only one spouse needs to have compensation in most cases.
Do you have other questions you have about lowering your taxes with IRAs? Call me at (734) 332-9949.
Taxes and Unemployment Benefits
Unemployment is Taxable. It includes all unemployment compensation as income for the year. Taxpayers should have received a Form 1099-G, Certain Government Payments, by Jan. 31. This form shows the amount received and the amount of any federal income tax withheld.
Tax May be Withheld. Those who receive unemployment can choose to have federal income tax withheld by using Form W-4V, Voluntary Withholding Request. Those choosing not to have tax withheld may need to make estimated tax payments during the year.
Taxpayers facing financial difficulties should visit the IRS.gov page: “What Ifs” for Struggling Taxpayers. This page explains the tax effect of various life events such as job loss. For those who owe federal taxes and can’t pay, the Payments tab on IRS.gov provides some options. In many cases, the IRS can take steps to help ease financial burden.
Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.
Here are important things to remember:
1. Self-employed taxpayers generally need to make quarterly estimated tax payments.
2. Self-employed taxpayers must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, with their Form 1040.
3. For those making a profit, self-employment and income taxes need to be paid. Self-employment tax includes Social Security and Medicare taxes.
4. Taxpayers can deduct expenses paid to run a business that are both ordinary and necessary.
5. Taxpayers can deduct expenses in the year paid or incurred. Some costs must be ‘capitalized.’
Questions? Call (734) 332-9949
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In filing your tax returns, you need to have your drivers license available. Your drivers license number needs to be imputed on my computer to e-file your return, this is required to help prevent identity theft.
State of Michigan : If an individual income tax return has been selected for identity confirmation, the taxpayer will receive a letter from the State of Michigan Treasury.