Reviewing the amount of taxes withheld can help taxpayers avoid having too
much or too little federal income tax taken from their paychecks. Having the
correct amount taken out helps to move taxpayers closer to a zero balance at
the end of the year when they file their tax return, which means no taxes owed
or refund due.
During the year, changes sometimes occur in a taxpayer’s life, such as in
their marital status, that impacts exemptions, adjustments or credits that they
will claim on their tax return. When this happens, they need to give their employer
a new Form W-4, Employee’s Withholding Allowance Certificate, to change their
withholding status or number of allowances.
Employers use the form to figure the amount of federal income tax to be
withheld from pay. Making these changes in the late summer or early fall can
give taxpayers enough time to adjust their withholdings before the tax year
ends in December.
Making a Withholding
Adjustment
In many cases, a new Form
W-4, Employee’s Withholding Allowance Certificate, is all that is needed to
make an adjustment. Taxpayers submit it to their employer, and the employer
uses the form to figure the amount of federal income tax to be withheld from
their employee’s pay.
The IRS offers several online resources to help taxpayers bring taxes paid
closer to what they owe. They are available anytime on IRS.gov. They include:
Self-employed taxpayers, including those involved in the sharing
economy, can use the Form 1040-ES worksheet to correctly figure their
estimated tax payments. If they also work for an employer, they can often forgo
making these quarterly payments by instead having more tax taken out of their
pay.
Source: Internal Revenue Service
contact@officetaxservices.com
(858)247-1680
Here are 10 tips taxpayers should know about deducting casualty losses:
1. Casualty
loss. A taxpayer may be able to deduct a loss based on
the damage done to their property during a disaster. A casualty is a sudden,
unexpected or unusual event. This may include natural disasters like
hurricanes, tornadoes, floods and earthquakes. It can also include losses from
fires, accidents, thefts or vandalism.
2. Normal wear
and tear. A casualty loss does not include losses from
normal wear and tear. It does not include progressive deterioration from age or
termite damage.
3. Covered by
insurance. If a taxpayer insured their property, they
must file a timely claim for reimbursement of their loss. If they don’t, they
cannot deduct the loss as a casualty or theft. Reduce the loss by the amount of
the reimbursement received or expected to receive.
4. When to
deduct. As a general rule, deduct a casualty loss in the
year it occurred. However, if a taxpayer has a loss from a federally declared
disaster, they may have a choice of when to deduct the loss. They can choose to
deduct it on their return for the year the loss occurred or on an original or
amended return for the immediately preceding tax year.
This means that if a disaster loss occurs in 2017, the taxpayer doesn’t need
to wait until the end of the year to claim the loss. They can instead choose to
claim it on their 2016 return. Claiming a disaster loss on the prior year's
return may result in a lower tax for that year, often producing a refund.
5. Amount of
loss. Figure the amount of loss using the following
steps:
- Determine the adjusted
basis in the property before the casualty. For property a taxpayer buys,
the basis is usually its cost to them. For property they acquire in some
other way, such as inheriting it or getting it as a gift, the basis is
determined differently.
- Determine the decrease
in fair market value, or FMV, of the property as a result of the casualty.
FMV is the price for which a person could sell their property to a willing
buyer. The decrease in FMV is the difference between the property's FMV
immediately before and immediately after the casualty.
- Subtract any insurance
or other reimbursement received or expected to receive from the smaller of
those two amounts.
6. $100 rule.
After figuring the casualty loss on personal-use property, reduce that loss by
$100. This reduction applies to each casualty-loss event during the year. It
does not matter how many pieces of property are involved in an event.
7. 10 percent
rule. Reduce the total of all casualty or theft losses on
personal-use property for the year by 10 percent of the taxpayer’s adjusted
gross income.
8. Future
income. Do not consider the loss of future profits or
income due to the
casualty.
9. Form 4684.
Complete Form
4684, Casualties and Thefts, to report the casualty loss on a federal tax
return. Claim the deductible amount on Schedule
A, Itemized Deductions.
10. Business or
income property. Some of the casualty loss rules for
business or income property are different from the rules for property held for
personal use.
Call the IRS disaster
hotline at 866-562-5227 for special help with disaster-related tax issues.
Source: Internal Revenue Service
contact@officetaxservices.com
(858)247-1680
