WASHINGTON — Tax Day is appropriate about the corner, and this year it avalanche on Tuesday, April 17, not April 15. That gives taxpayers two added canicule to either book or extend their 2017 tax returns. So let’s analysis what you charge to book on or afore April 17, as able-bodied as some last-minute tax tips to consider.
It is important to accept that filing a 2017 addendum does not extend the date back your absolute 2017 assets taxes are due. They are still due in abounding by April 17, 2018. As continued as extensions are appropriately filed on a appropriate basis, they will be automatically granted.
If you book your federal tax acknowledgment backward and owe taxes, two penalties (plus interest) may apply. The aboriginal is a failure-to-file amends for backward filing, which is commonly 5 percent of the contributed taxes for anniversary ages that a tax acknowledgment is late, not to beat 25 percent of your contributed taxes. The added amends is a failure-to-pay amends for advantageous late, which is amid a half-percent and 1 percent per ages of your contributed taxes, up to a best of 25 percent.
Also, the IRS accrues absorption based on the federal concise bulk added 3 percent on any contributed tax from the due date of the acknowledgment until the date of acquittal in full.
Penalties and absorption are abrupt and alpha accruing on the day afterwards the tax filing due date. Regardless, if you cannot pay your taxes in full, you should still book your tax acknowledgment with addendum on time and pay as abundant as you can. The IRS can assignment with you to advice you dness your tax debt, including ambience up an chapter agreement.
In accession to filing your 2017 assets tax acknowledgment (or extension) by April 17, some people, abnormally those who are self-employed and/or acquire assets alfresco of their salary, may charge to book estimated tax payments for 2018. Estimated federal tax payments are due annual on April 17, June 15 and Sept. 15, 2018, and Jan. 15, 2019, application the 1040-ES payment vouchers.
Now that we accept advised what you charge to book by April 17, let’s altercate a few last-minute tips to accede for your 2017 tax return. Aboriginal and foremost is establishing and allotment your retirement plan.
As of the end of 2017, you would accept already adjourned your 401(k) or 403(b) employer-sponsored retirement plans, so let’s analysis added retirement cartage that may accomplish faculty to armamentarium for tax year 2017 either by April 17, 2018, or after if you book an extension.
This blueprint serves as a accessible adviser for added types of retirement affairs based on adapted gross assets (AGI) limitations, best accession and catch-up contributions, if you are 50 and older. Click it to aggrandize it:
The borderline for authoritative tax year 2017 IRA or Roth IRA contributions is April 17. If you accept to put money a in a SEP IRA or Solo 401(k) for 2017, you can armamentarium these as backward as Oct. 15, 2018, if you accept filed an extension.
SEP IRAs and Solo 401(k)s can be actual adorable retirement affairs for self-employed people. They acquiesce a best tax-deductible accession of $54,000 to $60,000 for tax year 2017, depending on your age and net income. Specifically, a sole freeholder is accustomed to armamentarium 20 percent of their net assets (not to beat $270,000), for a best retirement accession of $54,000. A Solo 401(k) allows an added $6,000 accession if you are 50 or older.
Keep in apperception that you would accept had to authorize your Solo 401(k) by Dec. 31, 2017, in adjustment for your contributions to be acceptable for 2017. A SEP IRA can be accustomed up until your 2017 addendum borderline in 2018. If you are a sole freeholder who had a acknowledged year in 2017 and accept not yet accustomed a retirement plan, you may appetite to accede aperture a SEP IRA to aerate your tax-deductible accession afore filing your 2017 tax acknowledgment in 2018.
A quick chat about acceptable IRAs and Roth IRAs: The absolute bulk an alone can accord to either an IRA or Roth IRA (or breach amid them) is $5,500 beneath age 50 or $6,500 at age 50 or older. There are specific AGI limitations for both types of IRAs, and you charge accept becoming assets from a salary, self-employment assets or keep to be acceptable to contribute. Passive assets from investments does not authorize as becoming income.
In addition, a nonworking apron can accomplish an IRA or Roth IRA accession for the aforementioned 2017 limits, as continued as the brace files a collective tax acknowledgment and the alive apron has becoming assets that covers the sum of both the alive and nonworking spouse’s IRA contributions, but does not beat the best AGI limits. For affiliated couples, the becoming assets claim can be accomplished absolutely by one spouse.
Contributions to a acceptable IRA are about tax-deductible, with taxes actuality paid back aloof in retirement. Conversely, contributions to a Roth IRA are not tax-deductible, but condoning withdrawals are 100 percent tax-free.
Lastly, no bulk which retirement plan you accept to authorize and fund, don’t delay until the actual aftermost minute to accomplish your contribution.
Based on the 2018 tax law changes, 2017 will be the final year to abstract assorted itemized deductions in balance of 2 percent of your AGI on your Schedule A. Accomplish abiding to absolutely abstract costs such as tax alertness and advance administration fees, as able-bodied as unreimbursed agent business expenses, on your 2017 tax return.
Unreimbursed agent costs can awning a advanced array of accustomed and all-important business expenses, such as able and abutment dues, work-related apprenticeship and training, a home office, subscriptions to able journals, appropriate uniforms not acceptable for accustomed use, travel, commons and ball apropos to work. You should analysis the specific IRS requirements for these categories afore deducting these expenses. These costs will no best be deductible as an itemized answer for years 2018 thru 2025.
Ordinary and all-important business costs paid as allotment of your self-employment business and appear on Schedule C are still deductible for 2018 and approaching years.
To the admeasurement you accept any carryforward basic losses from the above-mentioned year, accomplish abiding they are accurately appear on your Schedule D to account basic assets from the accepted year.
If you acquired rental acreage during 2017, don’t balloon to booty abrasion and any added costs that you may be advantaged to. It is additionally account acquainted that the $10,000 accumulated limitation rules for accompaniment and acreage taxes starting in 2018 do not administer to taxes paid with accustomed on a barter or business such as rental property. Therefore, taxes paid for an individual’s bona fide rental acreage abide absolutely deductible, and not accountable to the $10,000 limitation for the 2018 tax year and beyond.
2017 may be the final year that abounding taxpayers will be accountable to the alarming Alternative Minimum Tax (AMT), at atomic through year 2025. The aboriginal absorbed of the AMT was to ensure that bodies pay a minimum bulk of tax, behindhand of the bulk of deductions taken on their return. The AMT is a alongside tax arrangement that appropriate filers to account their tax bill alert — based on approved tax cipher rules and beneath AMT rules — and pay whichever tax is higher.
Inclusive of tax year 2017, abounding taxpayers accept been accountable to the AMT due to the addback of assertive itemized deductions, such as accompaniment and acreage taxes, and assorted itemized deductions.
Starting in 2018, the cardinal of tax filers hit by the AMT may bead by added than 95 percent. According to the Tax Policy Center, alone about 200,000 tax filers are accepted to owe AMT for the 2018 tax year, against the 5.25 actor who acceptable would accept beneath the old (2017) tax law.
The new 2018 tax law fabricated three above changes to AMT calculations that badly cuts who will owe AMT activity forward. These changes accommodate eliminating the addbacks of assorted itemized deductions and capping accompaniment and acreage taxes at $10,000; accretion the bulk of assets automatically absolved from AMT to $109,400 for collective filers and $70,300 for alone filers, and lastly, badly accretion the absolution phaseout akin to $1 actor for collective filers and $500,000 for alone filers.
Starting in 2018, best households authoritative amid $200,000 and $1 actor will be able to booty abounding advantage of the absolution levels and no best be accountable to the AMT.
One final word: Too often, abounding women who await on their apron or accomplice to adapt or administer the alertness and filing of their collective tax acknowledgment do not booty the time to analysis the acknowledgment afore signing it. If this sounds like you, we appetite you to read: Never Sign a Tax Acknowledgment You Haven’t Read, and again accomplish abiding to analysis your 2017 and approaching tax returns! You’ll be animated that you did.
Nina Mitchell is a arch and chief abundance adviser at The Colony Group, and co-founder of Her Wealth®.
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