It Takes a Genius To Do Your Taxes, Right?

by NFS | Feb 11, 2016 | Archives

No, it doesn’t take a genius to do your taxes.

A do-it-yourself tax software ad says “it doesn’t take a genius to do your taxes.” That is quite correct. It doesn’t take a genius to do your taxes.

It also doesn’t take a genius to do the wiring in your house nor does it take a genius to install a toilet. It doesn’t take a genius to make a soufflé; and it does not take a genius to change the brakes on your car.

All of these things you can certainly do yourself. If you figure them out without training or experience, you may luck out and not get electrocuted, or flood your house, or serve an embarrassing dessert to your guests, or hit something because your brakes fail.

Yes, you can certainly do your own taxes, but you don’t know what you don’t know. The IRS knows this about do-it-yourselfers, and give those tax returns more scrutiny.

You don’t need us to do your taxes and you also don’t need insurance on your house. But, once your house is in flames and your tax return under scrutiny, you’re going to wish you had spent the money.

What You Think Your Tax Software Costs? 

The initial price of tax software ranges from $29.95 to $104.99. While that doesn’t sound expensive, it’s a small part of the total cost. The true cost of tax software is more than just the price you pay at checkout.

How Much Is Your Time Worth?

You’ve got better things to do than taxes. According to the IRS, tax filers spend 13 hours on average preparing and filing their taxes (per IRS Source). If your average household income is $50,000, that’s $312 of your time. That’s a lot of money! The average time is takes to do taxes using a tax advisor is 2 hours, that’s a great savings.

The Cost of Missed Deductions

Based on a recent survey, the average tax refund of tax software users is $1824. The average tax refund of people using a tax advisor is $2615, or a difference of $791! Get your entire refund by working with a tax advisor.

Your Total Cost for Using Tax Software

$1166 is the total cost you could have for doing your own taxes. This is the Purcahse Cost + Time Cost + Difference in the Refund. And these are just Federal Tax figures. If you have to file a state tax return, these numbers can increase! Save Money. Save Time. Save Frustration. Hire a Trustworthy Tax Advisor to help you file your taxes today. Contact our office today for assistance.

The Earned Income Tax Credit: Often Missed

by NFS | Feb 10, 2016 | Archives

The Earned Income Tax Credit has helped workers with low and moderate incomes get a tax break for 40 years. Yet, one out of every five eligible workers fails to claim it. Here are some things you should know about this valuable credit:

• Review Your Eligibility. If you worked and earned under $53,267, you may qualify for EITC. If your income or family situation has changed, you should review the EITC eligibility rules. You might qualify for EITC this year even if you didn’t in the past. If you qualify for EITC you must file a federal income tax return and claim the credit to get it. This is true even if you are not otherwise required to file a tax return. Don’t guess about your EITC eligibility. Use the EITC Assistant tool on IRS.gov. The tool can help you find out if you qualify for the credit. It can also estimate the amount of your EITC.
• Know the Rules. You need to understand the rules before you claim the EITC, to be sure you qualify. It’s important that you get this right. Here are some factors you should consider:

1. If you are married and file a separate return you do not qualify for EITC.
2. You must have a Social Security number that is valid for employment for yourself, your spouse, if married, and any qualifying child listed on your tax return.
3. You must have earned income. Earned income includes earnings from working for someone else or working for yourself.
4. You may be married or single, with or without children to qualify. If you don’t have children, you must also meet age, residency and dependency rules. If you have a child who lived with you for more than six months of 2015, the child must meet age, residency, relationship and the joint return rules to qualify.
5. If you are a member of the U.S. Armed Forces serving in a combat zone, special rules apply.

• Lower Your Tax or Get a Refund. If you qualify for EITC, you could pay less federal tax, no tax or even get a refund. EITC could be worth up to $6,242. The average credit was $2,447 last year.

For more on EITC, see IRS Publication 596, Earned Income Credit. It’s available in English and Spanish on IRS.gov or for more help in person, give us a call here at Northeast Financial Strategies Inc.

IRS Issues Nine Out of 10 Refunds in less than 21 Days

by NFS | Feb 9, 2016 | Archives

WASHINGTON — The Internal Revenue Service today reminded taxpayers that it issues 90 percent of refunds in less than 21 days. 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 phone app.

“As February approaches, more and more taxpayers want to know when they can expect their refunds,” said IRS Commissioner John Koskinen. “There aren’t any secret tricks to checking on the status of a refund. Using IRS.gov is the best way for taxpayers to get the latest information.”

Many taxpayers are eager to know precisely when their money will be arriving, but checking “Where’s My Refund” more than once a day will not produce new information. The status of refunds is refreshed only once a day, generally overnight.

“Where’s My Refund?” has the most up to date information available about your refund. Taxpayers should use this tool rather than calling.

Taxpayers can use “Where’s My Refund?”  to start checking on the status of their return within 24 hours after 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.

The IRS2Go phone app is another fast and safe tool taxpayers can use to check the status of a refund. In addition, users can use the app to find free tax preparation help, make a payment, watch the IRS YouTube channel, get the latest IRS news, and subscribe to filing season updates and tax tips. The app is free for Android devices from the Google Play Store or from the Apple App Store for Apple devices.
Users of both the IRS2Go app and “Where’s my Refund” tools must have information from their current, pending tax return to access their refund information.

The IRS reminded taxpayers there’s no advantage to calling about refunds. IRS representatives can only research the status of your refund in limited situations: if it has been 21 days or more since you filed electronically, more than six weeks since you mailed your paper return, or “Where’s My Refund?” directs you to contact us. If the IRS needs more information to process your tax return, we will contact you by mail.

The IRS continues to strongly encourage the use of e-file and direct deposit as the fastest and safest way to file an accurate return and receive a tax refund. More than four out of five tax returns are expected to be filed electronically, with a similar proportion of refunds issued through direct deposit.

The IRS Free File program offers free brand-name software to about 100 million individuals and families with incomes of $62,000 or less. Seventy percent of the nation’s taxpayers are eligible for IRS Free File. All taxpayers regardless of income will again have access to free online fillable forms, which provide electronic versions of IRS paper forms to complete and file. Both options are available through IRS.gov.

Aid & Attendance: Caring for our Aging Veterans

by NFS | Feb 8, 2016 | Archives

By Robert Deschene, Esq

As a nation, we owe our veterans a huge debt of gratitude for their selfless service and sacrifice for our country.  It is truly a debt we can never fully repay.  What we must do is ensure that they receive the respect and dignity they deserve when it comes time for them to receive long-term care at the end of their lives.  For that reason, the government offers qualified veterans many forms of financial assistance, such as pensions, home loans, life insurance, and education grants (through the GI Bill).

What is Aid & Attendance?

One of the lesser known programs available to some wartime veterans is called Aid and Attendance (A&A), which is administered by the Veterans Administration (VA), and which assists elderly or disabled veterans (or their surviving spouses) pay for the costs of long-term care, whether in-home care or in an assisted living facility or nursing home.    A&A provides a veteran up to $1,758 in tax-free benefits per month to a veteran, $1,130 to a surviving spouse, or $2,085 to a couple.
 
Who qualifies?

To qualify for A&A, the veteran’s disability need not be service-related.   He or she must have served at least 90 days on active duty, one day of which was during a “time of war” (i.e., World War II, the Korean conflict, or the Vietnam or Gulf Wars), and not have received a dishonorable discharge.  (Until the President or Congress officially declares an end date, the Gulf War is considered ongoing.)  A surviving spouse must have been married to the veteran for at least one year, or had a child together and cohabited until the veteran died.

Limits on Assets

An applicant must provide a written evaluation from their doctor describing a medical condition which makes them unable to care for themselves (e.g., dressing, bathing, cooking, eating, leaving home), and must disclose his or her assets and income. Unlike Medicaid, which normally requires applicants to have less than $2,000 in assets to qualify for long-term care benefits, A&A has no fixed dollar cut-off for assets.   Instead, the question is a subjective one, evaluating whether the applicant has sufficient “net worth” to pay for his or her own medical expenses for the remainder of their lives.   Like Medicaid, A&A does not count the home, a vehicle or personal belongings as assets, but other assets – like savings accounts, investments, and retirement accounts – are considered.   The VA assesses each application on a case-by-case basis, looking at the applicant’s particular circumstances, such as income, other medical and non-medical expenses, and life expectancy.  While many elder law attorneys suggest capping your assets at $80,000, the subjective “net worth” standard makes it difficult to predict whether an A&A application will be approved.

If the applicant has too many assets, he or she might be able to transfer them to an irrevocable trust or to your children in order to qualify for A&A.  Note, however, that these transfers might disqualify you from other benefits, such as Medicaid, if you need to enter a nursing home within five years of the transfer.

Robert Deschene, Esq.

Limits on Income

An A&A applicant (or surviving spouse) also must have limted income.  A&A limits a veteran to about $21,000 in annual income, $13,500 for a surviving spouse, or $25,000 for a couple.  Countable income includes any earned income (like wages), but also unearned income such as investment income, annuities, pension, and Social Security.  You are then allowed to deduct from this gross income amount all unreimbursed medical expenses.   These would include the out-of-pocket cost of an assisted living facility or nursing home, home health services, health insurance or Medicare premiums, and the cost of prescriptions.

Approval of an A&A application may take several months, but payments will be made retroactively to the date of application.

IRS to Parents: Don’t Miss Out on These Tax Savers

by NFS | Feb 4, 2016 | Archives

Children may help reduce the amount of taxes owed for the year. If you’re a parent, here are several tax benefits you should look for when you file your federal tax return:

• Dependents.  In most cases, you can claim your child as a dependent. You can deduct $3,950 for each dependent you are entitled to claim. You must reduce this amount if your income is above certain limits. For more on these rules, see Publication 501, Exemptions, Standard Deduction and Filing Information.
• Child Tax Credit.  You may be able to claim the Child Tax Credit for each of your qualifying children under the age of 17. The maximum credit is $1,000 per child. If you get less than the full amount of the credit, you may be eligible for the Additional Child Tax Credit. For more, see Schedule 8812 and Publication 972, both titled Child Tax Credit.
• Child and Dependent Care Credit.  You may be able to claim this credit if you paid for the care of one or more qualifying persons. Dependent children under age 13 are among those who qualify. You must have paid for care so that you could work or could look for work. See Publication 503, Child and Dependent Care Expenses, for more on this credit.
• Earned Income Tax Credit.  You may qualify for EITC if you worked but earned less than $52,427 last year. You can get up to $6,143 in EITC. You may qualify with or without children. Use the 2014 EITC Assistant tool at IRS.gov to find out if you qualify. See Publication 596, Earned Income Tax Credit, to learn more.
• Adoption Credit.  You may be able to claim a tax credit for certain costs you paid to adopt a child. For details see Form 8839, Qualified Adoption Expenses.
• Education tax credits.  An education credit can help you with the cost of higher education.  There are two credits that are available. The American Opportunity Tax Credit and the Lifetime Learning Credit may reduce the amount of tax you owe. If the credit reduces your tax to less than zero, you may get a refund. Even if you don’t owe any taxes, you still may qualify. You must complete Form 8863, Education Credits, and file a return to claim these credits. Use the Interactive Tax Assistant tool on IRS.gov to see if you can claim them. Visit the IRS’s Education Credits Web page to learn more. Also see Publication 970, Tax Benefits for Education, for more on this topic.
• Student loan interest.  You may be able to deduct interest you paid on a qualified student loan. You can claim this benefit even if you do not itemize your deductions. For more information, see Publication 970.
• Self-employed health insurance deduction.  If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid during the year. This may include the cost to cover your children under age 27, even if they are not your dependent. See Publication 535, Business Expenses, for details. 

If you need additional help with these items or anything else tax/financial related, give us a call here at Northeast Financial Strategies – 800-560-4637

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Six Tips on Whether to File a 2015 Tax Return

by NFS | Feb 3, 2016 | Archives

Most people file a tax return because they have to, but even if you don’t, there are times when you should. You may be eligible for a tax refund and not know it. Here are six tips to help you find out if you should file a tax return:

1. General Filing Rules. Whether you need to file a tax return depends on a few factors. In most cases, the amount of your income, your filing status and your age determine if you must file a tax return. For example, if you’re single and under age 65 you must file if your income was at least $10,300. Other rules may apply if you’re self-employed or if you’re a dependent of another person. There are also other cases when you must file. Go to IRS.gov/filing to find out if you need to file.
2. Premium Tax Credit.  If you enrolled in health insurance through the Health Insurance Marketplace in 2015, you may be eligible for the premium tax credit. You will need to file a return to claim the credit. If you chose to have advance payments of the premium tax credit sent directly to your insurer during 2015 you must file a federal tax return. You will reconcile any advance payments with the allowable premium tax credit. You should receive Form 1095-A, Health Insurance Marketplace Statement, by early February. The form will have information that will help you file your tax return
3. Tax Withheld or Paid. Did your employer withhold federal income tax from your pay? Did you make estimated tax payments? Did you overpay last year and have it applied to this year’s tax? If you answered “yes” to any of these questions, you could be due a refund. But you have to file a tax return to get it.
4. Earned Income Tax Credit. Did you work and earn less than $53,267 last year? You could receive EITC as a tax refund, if you qualify, with or without a qualifying child. You may be eligible for up to $6,242. Use the 2015 EITC Assistant tool on IRS.gov to find out if you qualify. If you do, file a tax return to claim it.
5. Additional Child Tax Credit. Do you have at least one child that qualifies for the Child Tax Credit? If you don’t get the full credit amount, you may qualify for the Additional Child Tax Credit.
6. American Opportunity Tax Credit. The AOTC is available for four years of post secondary education and can be up to $2,500 per eligible student. You, your spouse or your dependent must have been a student enrolled at least half time for at least one academic period. Even if you don’t owe any taxes, you still may qualify. You must complete Form 8863, Education Credits, and file it with your return to claim the credit. Use the Interactive Tax Assistant tool    on IRS.gov to see if you can claim the credit. Learn more by visiting the IRS’ Education Credits Web page.

If you need additional help to determine if you should be filing a tax return, please contact our office.