There are several notable changes to the state and federal tax laws this year, including Proposition 19 and increases in federal personal income tax rates.
You won’t have to do your taxes for year 2016 until next calendar year (2017), but the IRS has already released income tax changes that you can use to plan ahead.
As you will notice, the limits for many exemptions and credits will go up – allowing taxpayers to claim higher amounts on their income taxes.
Here, the top 8 income tax changes you should know about:
=&0=&. In 2016, taxpayers will benefit from a $50 increase on the personal exemption, which brings the new amount to $4,050.
Avoid mistakes on your income tax return to receive refunds quickly.
If you are like most American taxpayers, then getting a refund is some of the best news you will get all year. For that reason alone, you want to do all you can to avoid the delay of that refund.
Here are a few common income tax mistakes that you should avoid, in order to receive your money as quickly as possible:
=&0=&: Be sure that your names and social security numbers are absolutely correct, otherwise the Internal Revenue Service (IRS) cannot properly identify you.
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The term “tax extension” can be misleading, because it causes some folks to believe they can delay paying their taxes. This is not true.
A tax extension simply means that you have the option to file your tax return at a later date (but no later than October 15th of the same year) and without penalty if you are unable to collect all of the information needed to file your taxes by the April 15th deadline. However, even if you file for an extension, you still must pay your taxes due by April 15th.
Form 4868 must be posted by April 15 to extend your time to file taxes.
In order to qualify for an extension on filing your taxes, you or your tax preparer must submit Form 4868 to the Internal Revenue Service (IRS), or you must place it in the mail no later than April 15th.
Because this Form is an “Automatic Extension,” you do not need to file anything other than the Form. However, =&0=&
Inheriting an individual retirement account (IRA) can be a great monetary blessing for the recipient, but it can also raise many questions as to the rights and obligations associated with the transfer of money.
One of the most common questions that benefactors have when inheriting an IRA is, “Do I have to pay taxes?”
The short answer is, it depends.
If you inherit a Roth IRA, then you won’t owe any taxes to the IRS since the taxes are taken out when money is contributed. You can take the money out or let it continue to grow, without the tax liability.
But for traditional IRAs, where the money is tax-deferred, there are various rules that apply to certain individuals and situations. =&0=&
Inheriting an individual retirement account (IRA) can be a great monetary blessing for the recipient, but it can also raise many questions as to the rights and obligations associated with the transfer of money.