Tax Guide Updated for 2018 (Tax Year 2017)
IMPORTANT FOR 2018 Tax Guide: The Internal Revenue Service today released Notice 1036, which updates the income-tax withholding tables for 2018 reflecting changes made by the tax reform legislation enacted last month. This is the first in a series of steps that IRS will take to help improve the accuracy of withholding following major changes made by the new tax law.
Many employees will begin to see increases in their paychecks to reflect the new law in February. The time it will take for employees to see the changes in their paychecks will vary depending on how quickly the new tables are implemented by their employers and how often they are paid — generally weekly, biweekly or monthly.
***New tax laws mean potentially larger take home pay. However, that should not affect your 2017 tax return. When in doubt, I recommend preferred partner Turbo Tax to help you get your refund the quickest.***
Disclaimer: I am not a tax professional and this is not personal tax advice or tax advice of any kind. Please seek the help of a tax professional for your personal situation. Information is sourced from IRS.gov with reference links provided as well. Tax law changes each year and you should be aware of how those changes affect your personal tax situation.
Do I have to file taxes?
Whether you must file a federal income tax return depends on your gross income, your filing status, your age, and whether you are a dependent.
If you are an unmarried dependent student, you must file a tax return if your earned and/or unearned income exceeds certain limits. Unearned income includes interest, dividends and capital gains. Most likely you can file the simplest tax form, the 1040EZ and simply enter your income and wages. See Publication 501 to find out if you have to file.
If your filing status is single and at the end of 2016 you were younger than the age of 65, you must file a return if any of the following apply.
- Your gross income was at least $10,400.
If your filing status is single, you are not blind, at the end of 2017 you were younger than the age of 65, AND you can be claimed as a dependent on another's tax return, you must file a return if any of the following apply.
- Your unearned income was more than $1,050
- Your earned income was more than $6,350
- Your gross income was more than the larger of —
- $1,050 or Your earned income (up to $6,000) plus $350.
NEW - Bitcoin, Litecoin, Ethereum, Cryptocurrency Tax Rules
Do I need to pay taxes on my Cryptocurrency holdings?
According to the IRS, virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency. Among other things, this means that:
- Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
- Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply. Normally, payers must issue Form 1099.
- The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
- A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.
When is it too late to file my taxes?
You must file your taxes or request an extension typically by April 15th each year. This date could change by a day or two depending on if the 15th falls on a weekend. Check the IRS website for filing deadlines. The deadline for filing 2016 taxes is Tuesday, April 17th, 2018.
What records do I need to file my taxes?
In order to file your taxes, you will need your tax form, this will typically be a 1040EZ for the simplest filing. You will also need income stubs or an employer generated W-2, and/or a 1099-MISC.
What is the difference between a deduction and a credit?
A deduction reduces the tax burden while a credit subtracts directly from the taxes owed. A deduction cannot be paid back to you but only reduces your taxable income. A credit could come directly back to you in the form of a refund depending on the amount of taxes you owe.
Are there special deductions or credits for students?
Some college students are eligible for Education Tax Credits, while others will be eligible for a tax deduction based on education spending.
American Opportunity Credit: This was set to expire at the end of 2010 but was extended for an additional seven years through December 2017 by the American Tax Payer Relief Act of 2012. The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels.
If you do not qualify for the American Opportunity Credit, you may qualify for the Lifetime Learning Credit. You cannot take the American Opportunity Credit and the Lifetime Learning Credit for the same student in the same year.
Lifetime Learning Credits: This credit can help pay for undergraduate, graduate and professional degree courses – including courses to improve job skills – regardless of the number of years in the program. Eligible taxpayers may qualify for up to $2,000 per taxpayer.
Tuition and fees deduction:
Students and their parents may be able to deduct qualified college tuition and related expenses of up to $4,000. This deduction is an adjustment to income, which means the deduction will reduce the amount of your income subject to tax. The Tuition and Fees Deduction may be beneficial to you if you do not qualify for the American opportunity, Hope, or Lifetime learning credits.
Note: The Tuition and Fees Deduction expired Dec. 31, 2013. You may claim it on your tax year 2013 or prior years' tax returns. Under current law, the deduction is not available for tax years after 2013.
(Click here to file with TurboTax and automatically run an analysis to determine what you qualify for that would give you the biggest credit or deduction.)
How much tax do I have to pay?
The amount of income that you generate in a tax year will determine the amount of tax that you owe after adjusted for deductions and credits. The Standard Deduction is a dollar amount that reduces the amount of income on which you are taxed. If you are single, born after 1949, not blind, and no one can claim you, the standard deduction for the 2017 tax year is $6,350. Take this quick quiz to determine if you qualify for a higher standard deduction.
What if I did not receive a W-2?
Sometimes an employer will delay sending the W-2, which is the form you need to file your taxes. They are legally required to put it in the mail by the last day of January so you should receive it soon after. The IRS will begin accepting tax returns as of Monday, January 29th, 2018.
If I want to take my taxes to someone else to get them done, what are my options?
You have several options if you do not want to file your taxes on your own. One option is to take your paperwork to a tax accountant and have them file for you. This can be a costly option because a tax accountant typically will charge for each form filed.
Another option is to visit a branded tax office like an H&R Block or Liberty Tax Service. These offices typically have staff that are trained to ask the right questions to help you get the largest tax refund. However, they often use an online software to ask these questions and you get charged extra for the in person visit.
The same online software is available to you as well.
I've used TurboTax to do my taxes and the software is very easy to use. The software guides me through a series of questions to determine what deductions and credits I am eligible for. It guides just like a GPS does. I've been using Turbo Tax for several years now and I've used it to file my business taxes as well.
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More questions on taxes? Try the Interactive Tax Assistant at the IRS website.