Contribute to an IRA by April 17, 2018 and claim it for 2017

April 4, 2018

Anyone with an IRA may be eligible for a tax credit or deduction on their 2017 tax return if they make contributions by April 17, 2018. The IRS reminded taxpayers that it is not too late to contribute to an Individual Retirement Account (or Arrangement) (IRA) and still claim it on a 2017 tax return.

The majority of taxpayers who work are eligible to start a traditional or Roth IRA or add money to an existing account. Individual Retirement Accounts/Arrangements are designed to allow theses employees and people who are self-employed to save for retirement.

Contributions to a traditional IRA often are tax deductible, with distributions usually taxable. Contributions to a Roth IRA are not deductible, but qualified distributions are tax-free. To ne able to count for a 2017 tax return, contributions must be made by April 17, 2018. Additionally, low- and moderate-income taxpayers making such contributions could possibly also qualify for the Saver’s Credit.
Eligible taxpayers can generally contribute up to $5,500 to an IRA. For someone who was 50 years of age or older at the end of 2017, the limit is increased to $6,500. The same general contribution limit applies to both Roth and traditional IRAs. But, a Roth IRA contribution might be limited based on filing status and income. An person cannot make regular contributions to a traditional IRA in the year they reach 70½ and older, though they can still contribute to a Roth IRA and make rollover contributions to a Roth or traditional IRA regardless of their age.

If neither the taxpayer nor their spouse was covered for any part of the year by an employer retirement plan, they can take a deduction for total contributions to one or more traditional IRAs up to the contribution limit or 100 percent of the taxpayer’s compensation, whichever is less.

For 2017, if a taxpayer is covered by a workplace retirement plan, the deduction for contributions to a traditional IRA generally is reduced if the taxpayer’s modified adjusted gross income is between:
$0 and $10,000; married filing separately
$62,000 and $72,000; single and head of household
$99,000 to $119,000; married filing jointly or a qualifying widow(er)
$186,000 to $196,000; married filing jointly where the IRA contributor is not covered by a workplace retirement plan but is married to someone who is covered
The deduction for contributions to a traditional IRA is claimed on Form 1040, Line 32, or Form 1040A, Line 17.
Any nondeductible contributions to a traditional IRA must be reported on Form 8606.
Even though contributions to Roth IRAs are not tax deductible, the maximum permitted amount of these contributions is phased out for taxpayers whose modified adjusted gross income is above a certain level:
$0 to $10,000; married filing separately
$118,000 to $133,000; single and head of household
$186,000 to $196,000; married filing jointly
More detailed information on contributing to Roth or Traditional IRAs, refer to Publication 590-A, available on IRS.gov.
Saver’s Credit (also known as Retirement Savings Contributions Credit) is often available to IRA contributors whose adjusted gross income falls below certain levels. Eligible taxpayers get the credit even if they qualify for other retirement-related tax benefits. The Saver’s Credit (like other tax credits), can increase a taxpayer’s refund or reduce the taxes they owe. The amount of the credit is based on several factors, including the amount contributed to either a Roth or traditional IRA and other qualifying retirement programs.
For 2017, the income limit is:
$31,000; single and married filing separate
$46,500; head of household
$62,000; married filing jointly
Use Form 8880 to claim the Saver’s Credit, its instructions have details on figuring the credit correctly.

If you are under 7o years old and have an income under $65k you are eligible to file your tax return for free with e-file software. Secure, fast and simple! Come on over and try us! :

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The Earned Income Tax Credit, EITC

The Earned Income Tax Credit, EITC

The Earned Income Tax Credit, EITC or EIC, is a benefit for working people with low to moderate income. To qualify for this credit, you must meet certain requirements and must file a tax return, even if you do not owe any tax or are not required to file. EITC can reduce the amount of tax you owe and may give you a refund.
If you claim the earned income tax credit (EITC) or the additional child tax credit (ACTC) on your tax return, the IRS must hold your refund until mid-February, including the portion not associated with EITC or ACTC. You may track your refund through the IRS.

Do you qualify?

To qualify for EITC you must have earned income from working for someone or from running or owning a business or farm and meet the basic rules. In addition you must also either meet additional rules for workers without a qualifying child or have a child that meets all the qualifying child rules for you.
There is an IRS link: https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/use-the-eitc-assistant ,  EITC Assistant to see if you qualify for tax years: 2016, 2015, and 2014. This link will help you find out your filing status, if your child is a qualifying child, if you are eligible and estimate the amount of the EITC you may get.
Use the EITC Income Limits, Maximum Credit Amounts and Tax Law Updates link for the current year, previous years and the upcoming tax year.

I Received an EITC Notice

The IRS does send letters about EITC that may include the following:

Suggest you claim EITC if you do qualify.
Ask you to send information to verify your EITC claim.
Provide important information about your claim.

Visit EITC Central  https://www.eitc.irs.gov/  for more tools and information. Then visit us at
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We also have a Facebook page where you can find handy tips and deadlines https://www.facebook.com/freetaxreturninc/ , as well as a Twitter page https://twitter.com/Free1040Returns .
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Hurricane Harvey Hardship Loans

Sept 2017 The Internal Revenue Service announced that 401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Harvey and members of their families. Similar relief was provided last year to Louisians flood victims and victims of Hurricane Matthew.

Those who participate in 401(k) plans, employees of public schools and tax-exempt organizations with 403(b) tax-sheltered annuities, and state and local government employees with 457(b) deferred-compensation pland may be able to take advantage of these loan procedures and liberalized hardship distribution rules. IRA participants are barred from taking out loans, but may be eligible to receive distributions under liberalized procedures.

Retirement plans can provide this relief to employees and certain members of their families who live or work in disaster areas affected by Hurricane Harvey and designated for assistance by (FEMA). For a complete list of eligible counties, visit https://www.fema.gov/disasters
Hardship withdrawals must be made by Jan. 31, 2018.

Estimated Taxes

You must pay taxes as you earn or receive income during the year, either through withholding or estimated tax payments. If the amount of income tax withheld from your salary or pension is not enough, or if you receive other income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, you may have to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax.If you are in business for yourself, you generally need to make estimated tax payments.

If you don’t pay enough tax, you may be charged a penalty. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.

Note: Estimated tax requirements are different for farmers and fishermen. You can find info in Publication 505 Tax Withholding and Estimated Tax for more information about these special estimated tax rules.

Individuals who expect to owe tax of $1,000 or more when their return is filed usually have to make estimated tax payments. This includes sole proprietors, partners, and S corporation shareholders.

In addition corporations usually have to make estimated tax payments if they expect to owe tax of $500 or more when their return is filed.

You may have to pay estimated tax for the current year if your tax was more than zero in the prior year. Forms 1040-ES, Estimated Tax for Individuals (PDF), and Form 1120-W Estimated Tax for Corporations (PDF), list details on who must pay estimated tax.

If you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to withhold more tax from your earnings. Simply file a new Form W-4 with your employer and indicate the additional amount you want your employer to withhold.

You do not have to pay estimated tax for the current year if you meet all three of the following conditions.

1. You were a U.S. citizen or resident for the whole year.

2. You had no tax liability for the prior year. (You had no tax liability for the prior year if your total tax was zero or you didn’t have to file an income tax return.)

3. Your prior tax year covered a 12-month period.

Individuals, including sole proprietors, partners, and S corporation shareholders, generally use Form 1040-ES (PDF), to figure estimated tax.

To figure your estimated tax, you must figure your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year.

When figuring your estimated tax for the current year, it may be helpful to refer to your income, deductions, and credits for the prior year as a starting point. You need to estimate the amount of income you expect to earn for the year. If you estimated your earnings too high, simply complete another Form 1040-ES worksheet to refigure your estimated tax for the next quarter. If you estimated your earnings too low, again complete another Form 1040-ES worksheet to recalculate your estimated tax for the next quarter. You want to estimate your income as accurately as you can to avoid penalties.

Refer to Publication 505, Tax Withholding and Estimated Tax for additional information on how to figure your estimated tax.

Corporations may use Form 1120-W (PDF), to figure estimated tax.

For estimated tax purposes, the year is divided into four payment periods-quarterly taxes, with each period having a payment due date. If you pay enough tax by the due date of each of the payment periods, You may be charged a penalty even if you’re due a refund when you file your income tax return if you do not pay enough tax by the due date.

You may pay your estimated taxes weekly, bi-weekly, monthly, as long as you’ve paid enough in by the end of the quarter. Using the Electronic Federal Tax Payment System (EFTPS), you can access a history of your payments, so you know how much and when you made your estimated tax payments.

Corporations must deposit the payment using the Electronic Federal Tax Payment System (EFTPS). For additional information, refer to Publication 542, Corporations.

If you didn’t pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. Again, there are special rules for farmers and fishermen.

If your income is received unevenly during the year, you may be able to avoid or lower the penalty by annualizing your income and making unequal payments.

The penalty may also be waived if the failure to make estimated payments was caused by a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or you retired (after reaching age 62) or became disabled during the tax year for which estimated payments were required to be made or in the preceding tax year, and the underpayment was due to reasonable cause and not willful neglect.