A 529 is a great way to save for education expenses. Withdrawals are tax-free when used on qualified education expenses. However, if the money is withdrawn for non-qualified expenses or if there is money left over to be withdrawn after all expenses are paid this is considered taxable income. In addition to paying taxes on the leftover amount, you will also incur a 10% penalty for these withdrawals.
The IRS typically issues a tax refund within 21 days of receiving electronically filed returns and 42 days after receiving paper returns. Mail delivery is taking longer to process so this may be delayed if you are mailing your tax return or are expecting a check by mail as your refund. The IRS’ web site allows you to track your refund status at Get Refund Status (irs.gov). You will need your social security and the anticipated refund amount that you are expecting.
Once married, you and your spouse can file taxes jointly, which has a number of tax benefits. If either one of you makes significantly less income, this can lower your tax bracket and reduce your tax rate. Combining incomes will bring the partner in the higher tax bracket to a lower level, reducing the couple’s overall tax bill. There are also more deductions available to married couples filing jointly, including a higher threshold for charitable contributions and residency gain.
Currently taxpayers can claim a tax credit of $2,000 per child under age seventeen. The American Rescue Plan raises that amount to $3,600 for children under age six and $3,000 for those between six and seventeen. This change means additional tax credit per child, and it allows those that are seventeen to now qualify as well. While the majority of families with minor children will qualify for this additional tax credit, there are income limits that will restrict others.
To file a tax amendment, you will need to submit new forms for the sections of your taxes that are being amended. The IRS’ web site allows you to download these forms from previous tax years. You will need to submit the 1040X form, also available on the IRS web site. Using this form, you can write in the reason for filing the amendment.
A Brookline resident needed to make an amendment to a previous year’s tax return. Wanting to make sure this was done properly, he contacted Merrimack Tax Associates.
Unmarried individuals have the option of either single or head of household as their tax status. When filing as head of household, you have a much higher standard deduction than single filers, as well as a better overall tax rate. To qualify as head of household you must be unmarried, pay greater than half the costs of supporting a household and have at least one dependent that lives with you.
Homes that are used solely for personal use cannot have the cost of home improvement projects deducted. However, if down the road you sell your home for a profit the money paid for home deductions can be deducted from this profit. This ends up being less of a profit that will be taxed when the home is sold. If part of the home is used for business and this area is affected by the renovations, you can deduct 100% of this cost.
While employers and institutions have a deadline for sending out tax paperwork, there are plenty of reasons it may fail to get into your hands. Whether lost in the mail, misplaced or some other event, the best step is to contact the issuer of the document. They may be able to send a duplicate copy right away. If you are still not having any luck getting the missing document, you can call the IRS. Providing information to the IRS about the document in question will make sure that you are covered when you go to file your taxes.
Businesses who took advantage of the Payroll Protection Program (PPP) can breathe a sigh of relief. Legislators have decided money from the PPP will allow for the deduction of expenses. This means that businesses will not lose any tax deductions that were expected because money was paid using the PPP loans. This is big news for businesses and a huge relief of a potentially hefty tax burden.
If you sell a home for a profit over what you paid for it, you will not have to pay taxes on this profit unless the gains exceed the threshold set by the IRS. For single filers, this is $125,000 and $250,000 for married taxpayers. Beyond this dollar amount, the remaining profit may be taxed as capital gains.