If you need help paying health insurance premiums during the year, you can apply to receive the Advance Premium Tax Credit.

You can claim the Advance Premium Tax Credit when you buy insurance coverage through a Health Insurance Marketplace and reconcile it on Form 1040 with Form 8962.

The credit is based on your estimated income for the year, so you can claim it before you actually file your taxes. The Advance Premium Tax Credit is paid directly to the insurance company every month to lower your premium payment amount.

If you received too much Advance Premium Tax Credit in 2020, you won’t have to pay back the excess—and if you’ve already filed your 2020 return and paid back the excess on Line 29 of Form 8962, Premium Tax Credit, you should not file an amended tax return only to get a refund of this amount. The IRS will determine the correct amount and refund it to you. 

Need more time to prepare your federal tax return?
Please be aware that:
  • An extension of time to file your return does not grant you any extension of time to pay your taxes.
  • You should estimate and pay any owed taxes by your regular deadline to help avoid possible penalties.
  • You must file your extension request no later than the regular due date of your return.
  • Filing this form gives you until Oct. 15 to file a return.
  • To get the extension, you must estimate your tax liability on this form and should also pay any amount due.

Get an extension when you make a payment

You can also get an extension by paying all or part of your estimated income tax due and indicate that the payment is for an extension using Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or a credit or debit card. This way you won’t have to file a separate extension form 4868 and you will receive a confirmation number for your records.

Reasons for Refund Delays

Some tax refunds take longer than expected. The IRS may delay refunds for several reasons, including the following:

• Errors in Direct Deposit information (refunds then sent by check);

• Financial institution refusals of Direct Deposits (refunds then sent by check) or delays in crediting the Direct Deposit to the taxpayer’s account;

• Claims of the Earned Income Tax Credit or Additional Child Tax Credit require the IRS to hold the entire refund until mid-February

• Estimated tax payments differ from amount reported on tax return (for example, fourth quarter payments not yet on file when return data is transmitted);

• Bankruptcy;

• Inappropriate claims for the Earned Income Tax Credit, Additional Child Tax Credit, Credit for Other Dependents’ Child Tax Credit, or American Opportunity Tax Credit; or

• Recertifications to claim the Earned Income Tax Credit, Child Tax Credit, Additional Child Tax Credit, Credit for Other Dependents’ or American Opportunity Tax Credit.

The IRS sends a letter or notice explaining the issue(s) and how to resolve the issue(s) to the taxpayer when it delays a refund. The letter or notice contains the contact telephone number and address for the taxpayer to use for further assistance.

The IRS offsets as much of a refund as is needed to pay overdue taxes owed by taxpayers and notifies them when this occurs. The Bureau of the Fiscal Service offsets taxpayers’ refunds through the Treasury Offset Program (TOP) to pay off past-due child support, federal agency non-tax debts such as student loans and unemployment compensation debts, and state income tax obligations. Offsets to non-tax debts occur after the IRS has certified the refunds to Fiscal Service for payment but before Fiscal Service makes the Direct Deposits or issues the paper checks. Refund offsets reduce the amount of the expected Direct Deposit or paper check but they do not delay the issuance of the remaining refund (if any) after offset. If taxpayers owe non-tax debts they may contact the agency they owe, prior to filing their returns, to determine if the agency submitted their debts for refund offset. Fiscal Service sends taxpayers offset notices if it applies any part of their refund to non-tax debts. Taxpayers should contact the agencies identified in the Fiscal Service offset notice when offsets occur if they dispute the non-tax debts or have questions about the offsets. If taxpayers need further clarification, they may call the Treasury Offset Program Call Center at (800) 304-3107. If a refund is in a joint name but only one spouse owed the debt, the “injured spouse” should file Form 8379, Injured Spouse Allocation.

The name of the credit is Child and Dependent Care Credit.

The amount of your work-related expenses you can use to determine your credit is a dollar cap. For one qualified person, the cap is $3,000, or $6,000 for two or more qualified individuals.

If you have paid work related expenses for caring for two or more qualified persons, the dollar limit applicable is $6,000. There is no need to split the cap equally between them. For example, if one qualified person’s work-related expenses are $3,200 and another qualifying person’s work-related expenses are $2,800, you can use a total of $6,000 when calculating your credit.

The cap for the year. The dollar limit is the yearly limit. The dollar cap remains the same no matter how long your household has a qualified person in the course of the year. Use the $3,000 cap if, at any point during the year, you have charged job related expenses to care for a qualified person. Use $6,000 if over the year you have paid work related expenses to care for more than one qualified person at any time.

Example: You pay $500 a month for an after-school care for your  son. On May 1 he turned 13, and is no longer a qualified person. Between January to April, you can use the $2,000 of your care costs to determine your bonus, as this is no more than the $3,000 annual limit.

Example: In July of this year you enrolled your 3-year-old daughter in a nursery school which provides pre-school childcare to enable your spouse to start a new job. For child care you paid $300 a month. You can use the entire $1,800 you charged ($300 for about 6 months) as a deductible expense as it does not surpass the $3,000 annual limit.

Financially, the time after graduation can be difficult. Starting on your own, looking for a job, trying to pay back money that you may have borrowed for school can all be very stressful when it comes to budget management. Fortunately, recent college graduates can claim a few tax breaks to save.

Three Tax Breaks:

Student Loan Interest Deduction: Borrowers earning less than $60,000 a year can receive a full deduction from the interest paid on the loan. Those in the interest range of $60,000 to $70,000 are entitled to a partial deduction. A borrower earning $55,000 a year with loans over $2,500 can save $625 at the time of taxation.

Lifetime Learning Credit: Taxpayers can receive a $2,000 annual credit for all qualifying expenses in their own or post-secondary education of their dependent. The credit is not reimbursable, but it matches the dollar’s expenditure. Lifetime learning credit reduces expenses of $2,000 or less to zero. Students who graduated in May can claim a portion of their tax return expenses. For those students in the first four years of post-secondary education, the American Opportunity Tax Credit is also available, offering $2,500 in credit.

Other opportunities: Graduates are eligible for a variety of tax credits and breaks that the young professional often overlooks. For example, your tax bill can be helped by 401 (k) retirement plans that allow pre-tax contributions, or a Roth IRA that taxes contributions but does not withdraw. Saving is another option that many graduates must earn a tax credit. Those who earn less than $18,000 per year are eligible for a tax credit of 50 percent of their savings of up to $2,000.

All it takes is a little bit of research and you can find a variety of tax credits and deductions to keep your money in your pocket. Every little bit helps, especially when you’re out of school.

Filing Status

When you file your taxes, you need to know which filing status you should use. The five different options differ and you’ll want to choose the one that gives you the greatest benefit. Make tax time easier and faster by submitting the correct status.

The five different status are: Single, joint marriage, separate marriage, head of household or qualifying widow. If you meet the required criteria in more than one status, you should file using the one that gives you the highest tax advantage.

Single: If you are not married, you would usually file a single status. It is important to be aware of special circumstances that may affect individuals who file single files. The IRS considers taxpayers legally separated, even if only for the month of December. Single unmarried persons without dependents should file this status, but those with dependents should consider their eligibility for the head of the household. Divorce and annulment are also considered for one purpose.

Married: Married couples may choose to file a single tax return together, or they may file separately using the status of married couples. Legally married couples must live together only for a small part of the tax year in order to file as married. Couples whose union falls under common law practices may also file as married if the state legally recognizes their jurisdiction. Partners who live separately but are not legally divorced must still file as a married taxpayer most of the time. Married couples who file both incomes on a single return jointly process. These types of returns require both parties to sign, and the couple shares the responsibility for tax payment. There are only a few circumstances in which the couple would not be affected by joint responsibility, such as innocent wife relief, liability separation (if they did not live together for the tax year) and fair relief. The primary filer may need to sign the return as a proxy in some cases, but written explanation must be included. This can happen if the military deploys one spouse.

Widowed: If your spouse died during the tax year and you didn’t remarry, you can file married together. You can then file as a qualifying widow for the next two years if you remain unmarried. Once you are remarried, you should file your current spouse as married. If you remarry the same year that your spouse dies, you will have to file with your deceased spouse and your new spouse separately. It is an important part of filing your tax return to choose the right status. This is one of the easy ways to maximize your tax benefit and take advantage of all your ideal status deductions and credits.

Business deductions

As a professional, you are probably aware of the many deductions you may be entitled to when you file your tax return. Almost anything you buy for the company can be deducted if it is necessary for the company. The cost must also be reasonable. The deductions can really add up for small businesses and help save some on your bottom line. Think about it this way: Your business falls into a 25 percent bracket and you buy a computer for $1,000. If the computer is used for business purposes, you can save $250 in a tax deduction. You are not eligible to claim a personal deduction.

Some of the most common deductions are: Office costs: Keeping a company office can lead to serious deductions. Rent and utilities can be deducted, and if you work from home, you can deduct a portion of your monthly rent if you don’t own your home. Make sure your home office meets all the requirements to deduct them. Travel expenses: Travel in connection with business can be deducted as long as the trip is spent on business. You can deduct airfare, accommodation and other costs. Meals you take during your business are deductible by 50 percent. If you organize your trip properly, you can even deduct costs on a half-business and half-personal trip. Transport: The most common deduction for companies is deductions for cars and trucks. All driving you do for business purposes can be deducted, with the exception of driving from your home to your workplace. You can either split your expenses or choose a standard deduction of 0.54.5 / mile. Instead of gas and repair costs, the standard deduction only requires you to track your miles. Meals / entertainment: In the past, companies could write off many outings as a cost. However, the IRS recently ended these deductions unless you have a genuine legitimate business reason to attend the event. Before, during or immediately after the event, you must have an in-depth business conversation. Depreciation: Some properties, such as cars, furniture and computers, are subject to depreciation and you can gradually claim the cost over time. Thanks to the IRS Code Section 179, you don’t always have to depreciate. This allows small companies to deduct the entire property cost and at the same time create a larger deduction. Supplies: If you purchase items to keep your company operating, you can deduct them. Simple supply costs, such as rubber bands and paper clips, also count. Legal costs: At some point during the tax year, you probably used professional legal services. If you paid for these services, you can deduct the cost as long as it deals directly with the company. Insurance: If the policies apply to the company, liability and property insurance can be deducted. You may be eligible to deduct part of your homeowner’s insurance if you work from your home office. Individuals who are self-employed can also deduct health insurance costs.

If you want to deduct payment for any type of medical expenditure this year, you must be aware of some new rules that apply to these types of deductions, as they may affect your return. If you are looking for deductions for medical or dental expenses, you should know the following guidelines.

Adjusted gross income-Your medical expenditure must exceed 7.5 percent of your adjusted gross income for the current tax year.

You must specify your deductions to claim any medical or dental expenses. These types of deductions do not form part of your federal tax return’s standard deduction. Payments during the tax year-Payments made during the 2018 tax year can only be claimed. If you paid by check, the date is usually considered the day on which you sent the check and not the date on which it was cashed. Out of Pocket Costs-If a third party or insurance plan has reimbursed any of your payments, you can’t claim them for deduction. You can only claim expenses paid for yourself, your spouse or your qualified dependent for medical and dental procedures. Travel-You can deduct travel costs for medical care. These may include items such as public transport, tolls, parking or ambulance payments. The standard mile reimbursement rate is 18 cents per mile driven if you provide your own transport.

No double dipping-If you have paid medical or dental expenses with a flexible expenditure account or a health savings account, you can not deduct the payments. In general, these payments come from plans that provide tax-free funds.

Estimated Taxes

You may be required to make estimated tax payments in certain circumstances, such as not having taxes withheld from your wages or paying too little each paycheck. Self-employed people generally pay taxes through estimated payments at the same time. If you are confused about the process of making estimated tax payments, these four tips can help answer some of your questions.

If you expect to pay more than $1,000 in federal income taxes in 2018, you should be prepared to pay estimated taxes. To determine how much you need to make in estimated payments, you should anticipate your full annual income, including any deductions or credits you may claim at the time of the tax. Some events in life, such as the marriage or birth of a dependent child, may change the amount of taxes you have to pay. If you rely on estimated tax payments, you usually pay four times a year. Payments are usually made on or about 15 April, June and September, and then again on 15 January of the following year. For estimated payments made for 2018, you will pay in April, June and September 2018, and your final payment will be due by 15 January 2019. Payments can be made online or by telephone. Alternatively, you can use Form 1040-ES, Estimated Tax for Individuals, which will provide vouchers for payment, if you decide to mail your payments.

Tax breaks for a home sale

As the real estate market begins to be positive, it is a good time to review the tax requirements for the sale of a home and any related tax breaks. If you sell your primary residence (the one you lived in full time), the sale may be free of taxes. All profits from the sale of a second or third home, however, are taxed. Tax break for married couples who file together can receive up to $500,000 ($ 250,000 for single filers) in tax-free profits from the sale of their first home. Profits above the threshold are taxed at long-term capital gains rates, which are currently 20% to 23.8%. The tax break applies only to individuals who sell their primary home and does not include home costs or improvements. It applies specifically to profits from the sale. Thanks to the $500,000 tax break, a married couple who bought a $200,000 home and spent $50,000 on improvements could sell for as much as $750,000 before owing federal taxes.

Eligibility: Homeowners can claim a tax break every two years, as long as they live in the home they sell for at least two of the last five years. Homes that meet the eligibility requirements may be duplexes, condos, boats or mobile homes, provided that they have standard plumbing, kitchens and sleeping facilities. Those who have been widowed in the last two years can claim the $500,000 exclusion if they sell the house within two years of the passing of their wife.

In addition, if the homeowner was required to move due to changes in employment, reasons related to health or an unexpected circumstance such as death or divorce, but did not comply with the two-year provision, he may be eligible for an exclusion. If you choose to use your holiday home as our main residence, the rules become a bit more complicated. The IRS will primarily determine the amount of time you spent on the property and prorate the amount of credit you are entitled to. Rental units that are part of the primary property of the homeowner, such as a basement or garage apartment, are not considered for the tax credit and only the percentage that the homeowner maintains specifically is eligible for the tax break.