Thursday, March 23, 2017

Tax Benefits for Higher Education



Higher education costs paid in 2016 can mean tax savings when taxpayers file their tax returns. If taxpayers, their spouses or their dependents took post-high school coursework last year, they may be eligible for a tax credit or deduction.

Here are some facts from the IRS about tax benefits for higher education.

For 2016, there are two tax credits available to help taxpayers offset the costs of higher education. The American Opportunity Credit and the Lifetime Learning Credit may reduce the amount of income tax owed. Use Form 8863 to claim the education credits.

The American Opportunity Credit (AOC) is:


  • Worth a maximum benefit up to $2,500 per eligible student.
  • Only for the first four years at an eligible college or vocational school.
  • For students pursuing a degree or other recognized education credential.
  • For students enrolled at least half time for at least one academic period during 2016. Taxpayers can claim the AOC for a student enrolled in the first three months of 2017 as long as they paid qualified expenses in 2016.

The Lifetime Learning Credit (LLC) is:


  • Worth a maximum benefit up to $2,000 per tax return, per year, no matter how many students qualify.
  • Available for all years of postsecondary education and for courses to acquire or improve job skills.
  • Available for an unlimited number of tax years

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999.

Tuesday, March 21, 2017

Where’s My Refund?


The Internal Revenue Service reminded taxpayers today that while more than 90 percent of federal tax refunds are issued in 21 days or less, some refunds may take longer. Many factors can affect the timing of a refund after the IRS receives the return. Also, taxpayers should take into consideration the time it takes a financial institution to post the refund to an account or for it to arrive in the mail.

The best way to check the status of a refund is online through the “Where’s My Refund?” tool at IRS.gov or via the IRS2Go mobile app.

"The majority of taxpayers receive a refund, and we understand those filers want to know when their refund will be issued. Our ‘Where’s My Refund?’ tool continues to be the best way for taxpayers to get the latest information," said IRS Commissioner John Koskinen.

“Where’s My Refund?” can be checked 24 hours after the IRS has received an e-filed return or four weeks after receipt of a mailed paper return. "Where’s My Refund?" has a tracker that displays progress through three stages: (1) Return Received, (2) Refund Approved and (3) Refund Sent.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999.

Monday, March 20, 2017

Winter Storm Extension


The Internal Revenue Service granted many businesses affected by this week’s severe winter storm additional time to request a six-month extension to file their 2016 federal income tax returns.  The IRS is providing this relief to victims and tax professionals affected by this week’s storm (known as Winter Storm Stella) that hit portions of the Northeast and Mid-Atlantic.

Business taxpayers who are unable to file their tax return by today’s due date (March 15, 2017) can request an automatic extension by filing Form 7004, available on IRS.gov, on or before March 20, 2017.  Form 7004 provides a six-month extension for returns filed by partnerships (Forms 1065 and 1065B) and S corporations (Forms 1120S).

Eligible taxpayers taking advantage of this relief should write “Winter Storm Stella” on their Form 7004 extension request (if filing Form 7004 by paper).  As always, the fastest and easiest way to get an extension is to file this form electronically.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999.

Friday, March 17, 2017

Electronic Payment/Payment Agreement Options Available


The Internal Revenue Service today reminded taxpayers that it’s easier than ever to pay taxes electronically. For those unable to pay on time, several quick and easy solutions are available.

Taxpayers who owe taxes can now choose among several quick and easy electronic payment options, including the following:

  • Electronic Funds Withdrawal allows taxpayers to e-file and pay from their bank account when using tax preparation software or a tax professional. EFW is only available when electronically filing a tax return.
  • Direct Pay. Available at IRS.gov/directpay, this free online tool allows taxpayers to securely pay their taxes directly from checking or savings accounts without any fees or preregistration. Taxpayers can schedule payments up to 30 days in advance. Those using the tool will receive instant confirmation when they submit their payment.
  • Credit or Debit Card. Taxpayers can pay online, by phone or with their mobile device through any of the authorized debit and credit card processors. The processor charges a fee. The IRS doesn’t receive or charge any fees for payments made with a debit or credit card. Go to https://www.irs.gov/payments for authorized card processors and phone numbers.
  • IRS2Go. The IRS2Go mobile app is free and offers taxpayers the option to make a payment with Direct Pay for free or by debit or credit card through an approved payment processor for a fee. Download IRS2Go free from Google Play, the Apple App Store or the Amazon App Store.
  • Electronic Federal Tax Payment System. This free service gives taxpayers a safe and convenient way to pay individual and business taxes by phone or online. To enroll or for more information, call 800-555-4477, or visit eftps.gov.
  • Cash. Taxpayers paying with cash can use the PayNearMe option. Payments are limited to $1,000 per day, and a $3.99 fee applies to each payment. The IRS urges taxpayers choosing this option to start early, because PayNearMe involves a four-step process. Initiating a payment well ahead of the tax deadline will help taxpayers avoid interest and penalty charges. The IRS offers this option in cooperation with OfficialPayments.com/fed and participating 7-Eleven stores in 34 states. Details, including answers to frequently asked questions, are at IRS.gov/paywithcash.   


Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999.

Thursday, March 16, 2017

Understanding the Child and Dependent Care Tax Credit



The IRS urges people not to overlook the Child and Dependent Care Tax Credit. Eligible taxpayers may be able claim it if they paid for someone to care for a child, dependent or spouse last year.

Work-Related Expenses. The care must have been necessary so a person could work or look for work. For those who are married, the care also must have been necessary so a spouse could work or look for work. This rule does not apply if the spouse was disabled or a full-time student.
Qualifying Person. The care must have been for “qualifying persons.” A qualifying person can be a child under age 13. A qualifying person can also be a spouse or dependent who lived with the taxpayer for more than half the year and is physically or mentally incapable of self-care.
Earned Income. A taxpayer must have earned income for the year, such as wages from a job. For those who are married and file jointly, the spouse must also have earned income. Special rules apply to a spouse who is a student or disabled.
Credit Percentage / Expense Limits. The credit is worth between 20 and 35 percent of allowable expenses. The percentage depends on the income amount. Allowable expenses are limited to $3,000 for paid care of one qualifying person. The limit is $6,000 if the taxpayer paid for the care of two or more.
Dependent Care Benefits. Special rules apply for people who get dependent care benefits from their employer. Form 2441, Child and Dependent Care Expenses, has more on these rules. File the form with a tax return.
Qualifying Person’s SSN. The Social Security number of each qualifying person must be included to claim the credit.
Care Provider Information. The name, address and taxpayer identification number of the care provider must be included on the return.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999.

Wednesday, March 15, 2017

What is the Additional Medicare Tax?

Some taxpayers may be required to pay an Additional Medicare Tax if their income is over a certain limit. The IRS would like people to know more about this tax.

Tax Rate. The Additional Medicare Tax rate is 0.9 percent.
Income Subject to Tax. The tax applies to the amount of wages, self-employment income and railroad retirement (RRTA) compensation that is more than a threshold amount. For more information, go to Questions and Answers for the Additional Medicare Tax.
Threshold Amount. Filing status determines the threshold amount. For those who are married and file a joint return, they must combine the wages, compensation or self-employment income of their spouse with their own. The combined total income determines if it is over the threshold for this tax. The threshold amounts are
Filing Status Threshold Amount
Married filing jointly $250,000
Married filing separately $125,000
Single $200,000
Head of household $200,000
Qualifying widow(er) with dependent child $200,000
Withholding / Estimated Tax. Employers must withhold this tax from wages or compensation when they pay employees more than $200,000 in a calendar year. Self-employed taxpayers should include it for estimated tax liability purposes.
Underpayment of Estimated Tax. People who had too little tax withheld or did not pay enough estimated tax may owe an estimated tax penalty. IRS Publication 505, Tax Withholding and Estimated Tax, provides rules and details on estimated taxes.
People who owe this tax should file Form 8959, with their tax return. People should also report any Additional Medicare Tax withheld by their employer or employers on Form 8959. IRS.gov offers more on this topic.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Tuesday, March 14, 2017

Medical and Dental Expenses May Impact Your Taxes


Medical expenses can trim taxes. Keeping good records and knowing what to deduct make all the difference. Here are some tips to help taxpayers know what qualifies as medical and dental expenses:

Itemize. Taxpayers can only claim medical expenses that they paid for in 2016 if they itemize deductions on a federal tax return.
Qualifying Expenses. Taxpayers can include most medical and dental costs that they paid for themselves, their spouses and their dependents including:
The costs of diagnosing, treating, easing or preventing disease.
The costs paid for prescription drugs and insulin.
The costs paid for insurance premiums for policies that cover medical care.
Some long-term care insurance costs.
Exceptions and special rules apply. Costs reimbursed by insurance or other sources normally do not qualify for a deduction. More examples of what costs taxpayers can and can’t deduct are in IRS Publication 502, Medical and Dental Expenses.

Travel Costs Count. It is possible to deduct travel costs paid for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. For use of a car, deduct either the actual costs or the standard mileage rate for medical travel. The rate is 19 cents per mile for 2016.
No Double Benefit. Don’t claim a tax deduction for medical expenses paid with funds from your Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from these plans are usually tax-free.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999.