Maximize retirement plan contributions
There’s still time to contribute to an IRA to lower your 2017 tax bill. You can deduct up to $5,500 ($6,500 if you’re 50 or older) from your taxes if you and your spouse are not covered by a retirement plan at work. You can receive a deduction for your IRA contributions if you’re covered by an employer-sponsored plan, but you’ll have to follow the income limits.There’s still time to contribute to an IRA to lower your 2017 tax bill. You can deduct up to $5,500 ($6,500 if you’re 50 or older) from your taxes if you and your spouse are not covered by a retirement plan at work. You can receive a deduction for your IRA contributions if you’re covered by an employer-sponsored plan, but you’ll have to follow the income limits.
To maximize your tax benefits in the future, make every effort to contribute the maximum amount allowable to your 401(k) or other type of deferred pension plan — especially if your employer matches your contribution. Think of the employer match as an immediate 100 percent return on your money. Even if there is no match, all of the funds are tax-deferred and grow tax-free.
Adjust your withholding
Another thing you can do to plan for future tax seasons: Check your year-to-date withholding and consider changing the taxes withheld if you are expecting a large refund.
This is especially important if you are claiming the earned income tax credit, or EITC, or the additional child tax credit. Why? The IRS is now required by law to hold all refunds on those returns until Feb. 27. The law was put into place to allow the agency additional time to detect and prevent tax fraud.
You will need to complete Form W-4, Employee’s Withholding Allowance Certificate, to adjust the amount of taxes withheld and submit it to your employer.
Protect your identity
Speaking of tax fraud, if you received an Identity Protection PIN, or IP PIN, in the past, then you must provide this number on your tax return not only this year but on all future tax returns. An IP PIN is a six-digit number assigned to eligible taxpayers that helps prevent fraudulent returns from being filed under your Social Security number. Remember, the IP PIN is your friend in getting the IRS to accept your tax return. However, this is no ordinary IP PIN, as it changes every year. You read that correctly — every year! If you do not receive the notification in the mail, you will need to go to the IRS website to retrieve it.
Declutter and reap a tax break
If you’re procrastinating your spring cleaning, now is the time to get going. You can make money by donating things you no longer need or want in your life. There are many charitable organizations that accept items other than cash such as clothing, books, electronics and other household items. The deduction is limited to the item’s fair market value, and the items must be in good condition or better to be deductible. If the value of the noncash items is more than $500, then you must file Form 8283, Noncash Charitable Contributions.
“Contributions must actually be paid in cash or other property before the close of your tax year to be deductible, whether you use the cash or accrual method,” according to the IRS.
Know the rules about foreign accounts
Have a foreign bank account? Was the balance in the account(s) greater than $10,000 total? If the answer is yes to both, you need to file what’s commonly referred to as an “FBAR,” a foreign bank account reporting form. The new name is FinCEN Report 114, FinCEN being an acronym for Financial Crimes Enforcement Network. As the name has the word “crime” in it, that should light a fire under your seat to make sure you’re in compliance as the penalties are very high for failing to report.
The requirements don’t stop there. If you maintain very high balances in your foreign accounts, you’ll have to file IRS Form 8938, Statement of Specified Foreign Financial Assets.
Also, if you meet certain thresholds of ownership in any foreign corporations or partnerships, or if you are the beneficiary of a foreign trust, you should be aware of the complex reporting requirements in those instances. Just a few of the pertinent forms are: Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations; Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts; Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund.
Be generous without tax repercussions
Every so many years, the IRS changes the annual exclusion for gifts that you can give without having to file a gift tax return. If you gave more than $14,000 in cash, property or gifts to anyone, you must report the gift on Form 709. The annual exclusion is $15,000 in 2018. If you are married, you can give a combined $28,000 ($30,000 in 2018) and remain under the radar.
Note that this applies to the person giving the gift; if you are receiving a gift, congratulations — you don’t have to do anything. That is, unless you receive a gift from a non-U.S. person. If you happen to receive such a gift that is greater than $100,000, you will have to report this on the IRS Form 3520.Your Content Goes Here