Tax Deadline Moves
With the tax deadline fast approaching there are still some last minute tax saving opportunities for many tax payers and some changes that you should be aware of. Here are a few that you might consider as the dreaded day draws near.
Tax Deadline Date Change
By act of congress the deadline for filing all individual income tax returns has always been April 15th. However this year because April 15th falls on a Saturday the date is switched to the next business day which is Monday the 17th. But because Washington DC celebrates a holiday called Patriots Day on the 17th the city closes all federal offices and no mail is accepted that day. So the due date this year will be the next day which is Tuesday April 18th. So for all of you procrastinators you get three extra days this year to file your tax return. If for some reason you cannot file on time you can always file an extension by filing the form 4868 which will extend the tax filing deadline to October 16th. However the extension does not extend the amount of time to pay your tax. If you expect to owe with your tax return you must pay at least 90% of what you expect to owe to avoid any penalties.
Retirement Accounts
Eligible savers can still open or fund traditional individual retirement account for 2016 by April 18th and get a tax deduction. The limit is $5,500 ($6,500 for people 50 and older). Taxpayers can also open or fund a Roth IRA until the tax deadline, and the contribution limits are the same. There is no tax deduction for a Roth but these accounts can provide future tax benefits that often make them a good choice for younger workers.
HSA Contributions
Contributions made to health savings accounts for 2016 can also be deductible if made before the tax filing deadline.
Charitable Contributions
Taxpayers have a nasty habit of cutting corners when deducting donations. Taxpayers deducting charitable contributions in excess of $250 or more must have a written notice or letter from the charity in order to legally take the deduction. The notice should give the date and amount of donation and value of any goods or services received in return. For donations less than $250 a canceled check may suffice. Special rules apply for non-cash donations. If what you are donating is less than $500 then you can just report the value of the donation on the return without filing a separate form. If the donation exceeds $500 then you have to file the form 8283 and report who the donation was from, a description of the donation, the original cost, and the FMV of what was donated. The FMV of the donation will be your deduction.
Offshore Accounts
Some taxpayers that have foreign bank accounts may have to file the form 114 often called the FBAR that reports the account and the account balance to the IRS. The bank balance must exceed $10,000. The deadline for filing this form is October 16th. The deadline in previous years was June 30th.