W. Edward Newton Jr., CPA, CFP (R) | 13850 Ballantyne Corporate Place, Suite 500 | Charlotte, NC 28277 | 704-552-8689

 

Prevent a Tax-Time Surprise + Miscellaneous Deductions Can Trim Taxes + How a Summer Wedding Can Affect Your Taxes



Check Your Tax Withholding this Summer to Prevent a Tax-Time Surprise
 

Each year, many people get a larger refund than they expect. Some find they owe a lot more tax than they thought they would. If this has happened to you, review your situation to prevent a tax surprise. Did you marry? Have a child? Change in income? Life events can have a major impact on your taxes. Bring the taxes you pay closer to the amount you owe. Here are some tips to help you come up with a plan:

 

New Job. When you start a new job, you must fill out a Form W-4, Employee's Withholding Allowance Certificate, and give it to your employer. Your employer will use the form to figure the amount of federal income tax to withhold from your pay. Use the IRS Withholding Calculator on IRS.gov to help you fill out the form. This tool is easy to use and it's available 24/7.

Estimated Tax. If you earn income that is not subject to withholding you may need to pay estimated tax. This may include income such as self-employment, interest, dividends or rent. If you expect to owe $1,000 or more in tax, and meet other conditions, you may need to pay this tax. You normally pay it four times a year. Use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to figure the tax.

Life Events. Check to see if you need to change your Form W-4 or change the amount of estimated tax you pay when certain life events take place. A change in your marital status, the birth of a child or the purchase of a new home can change the amount of taxes you owe. In most cases, you can submit a new Form W4 to your employer anytime.

Changes in Circumstances. If you are receiving advance payments of the premium tax credit, it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance payments of the premium tax credit help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

For more see Publication 505, Tax Withholding and Estimated Tax. You can get it on IRS.gov/forms at any time.
 



Miscellaneous Deductions Can Trim Taxes

Miscellaneous deductions may reduce your tax bill. These may include certain expenses you paid for in your work if you are an employee.

 

You must itemize deductions when you file to claim these costs. Many taxpayers claim the standard deduction, but you might pay less tax if you itemize. Here are some IRS tax tips you should know about these deductions:

The Two Percent Limit. You can deduct most miscellaneous costs only if their sum is more than two percent of your adjusted gross income. These include expenses such as:

Unreimbursed employee expenses.

- Job search costs for a new job in the same line of work.
- Tools for your job.
- Union dues.
- Work-related travel and transportation.
- The cost you paid to prepare your tax return. These fees include the cost you paid for tax preparation software. They also include any fee you paid for e-filing of your return.

Deductions Not Subject to the Limit. Some deductions are not subject to the two percent limit. They include:

- Certain casualty and theft losses. In most cases, this rule is for damaged or stolen property you held for investment. This may include property such as stocks, bonds and works of art.
- Gambling losses up to the total of your gambling winnings.
- Losses from Ponzi-type investment schemes.

You can't deduct some expenses. For example, you can't deduct personal living or family expenses. Claim allowable miscellaneous deductions on Schedule A, Itemized Deductions. For more about this topic see Publication 529, Miscellaneous Deductions. You can get it on IRS.gov/forms at any time.
 



How a Summer Wedding Can Affect Your Taxes

With all the planning and preparation that goes into a wedding, taxes may not be high on your summer wedding checklist.

However, you should be aware of the tax issues that come along with marriage. Here are some basic tips to help with your planning:

Name change. The names and Social Security numbers on your tax return must match your Social Security Administration records. If you change your name, report it to the SSA. To do that, file Form SS-5, Application for a Social Security Card. You can get the form on SSA.gov, by calling 800-772-1213 or from your local SSA office.

Change tax withholding. A change in your marital status means you must give your employer a new Form W-4, Employee's Withholding Allowance Certificate. If you and your spouse both work, your combined incomes may move you into a higher tax bracket or you may be affected by the Additional Medicare Tax. Use the IRS Withholding Calculator tool at IRS.gov to help you complete a new Form W-4. See Publication 505, Tax Withholding and Estimated Tax, for more information.

Changes in circumstances. If you or your spouse purchased a Health Insurance Marketplace plan and receive advance payments of the premium tax credit in 2016, it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace when they happen. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance credit payments are paid directly to your insurance company on your behalf to lower the out-of-pocket cost you pay for your health insurance premiums. Reporting changes now will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance, which may affect your refund or balance due when you file your tax return.

Address change. Let the IRS know if your address changes. To do that, send the IRS Form 8822, Change of Address. You should also notify the U.S. Postal Service. You can ask them online at USPS.com to forward your mail. You may also report the change at your local post office. You should also notify your Health Insurance Marketplace when you move out of the area covered by your current health care plan.

Tax filing status. If you're married as of Dec. 31, that's your marital status for the whole year for tax purposes. You and your spouse can choose to file your federal income tax return either jointly or separately each year. You may want to figure the tax both ways to find out which status results in the lowest tax.

Select the right tax form. Choosing the right income tax form can help save money. Newly married taxpayers may find that they now have enough deductions to itemize on their tax returns. You must claim itemized deductions on a Form 1040, not a Form 1040A or Form 1040EZ.


Don't hesitate to call us if you need help or want to get started on tax planning for 2016! If you have comments or questions on the information in these articles, as usual feel free to call our offices.


 

 

 


 

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Regards, W. Edward Newton Jr., CPA

Certified Public Accountant

 

 

 

 

W. Edward Newton Jr., CPA | Certified Public Accountant

13850 Ballantyne Corporate Place, Suite 500 Charlotte, North Carolina 28277
Phone: (704) 552-8689  |  Email: ed@newtonassociatescpa.com