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Did You File An Extension?

If you filed for an extension back in spring, you face an important deadline in about 2½ weeks.
Most people who received tax filing extensions from the Internal Revenue Service beyond the April 15 deadline typically have until Oct. 15 to file their returns. If you haven’t already begun to make some progress on this task, it’s time to get started.
Here are a few suggestions on how to avoid potential pitfalls in some key areas on those extended 2014 tax returns:

Sales Taxes:
For tax-year 2014,  taxpayers who itemize have a choice: They can deduct their state and local sales taxes instead of their state and local income taxes (but not both.) Deducting sales taxes, instead of state income taxes, can benefit millions of people who live in states with no state income tax, such as Florida, Washington and Texas. The option applies to all taxpayers who itemize, however, and could potentially help many people in other states, as well.
Charitable Gifts:
If you itemize your deductions and plan to deduct your charitable donations, pay attention to record-keeping rules.  According to IRS Publication 526, the kind of required documentation may vary depending on such factors as how much you gave and the type of gift (such as cash, noncash, or out-of-pocket expenses when donating your services).  In addition, don’t wait for an audit to determine if you are in compliance with these regulations.  Income tax deductions of $250 or more are only acknowledged if properly obtained by the filing deadline!
Excess FICA:
You may have over-withheld and be eligible for a tax credit if you worked for two or more employers last year.   This includes taxpayers with two jobs, as well as high-wage workers who switched jobs during the year. To claim credit, eligible taxpayers must determine how much Social Security tax was withheld from their pay.  For 2014, the maximum wages subject to Social Security tax was $117,000; thus, the maximum amount of tax that should have been withheld was $7,254 (6.2% of $117,000). If you had too much withheld, you may be able  to claim a credit for any excess amount.
Fixing Mistakes:
If you discover errors on returns you’ve already filed, consider “amending” those returns. It is important, however, to know that there are time limits for filing amended tax returns. The general rule is you must file your claim for a credit or refund within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. There are exceptions for certain circumstances, such as bad debts and worthless securities. If you amend your federal return, check to see if you need to do likewise for any state or local returns, too.

September 28th, 2015

Posted in Accounting,Featured,Tax

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