Daniel W. Polachek, P.C.

CONNECT

Address:

335 South St, P.O Box 234
Northampton, MA 01061

Phone:

413-584-5809

Fax/Other:

413-585-5876

30 Tax Tips

Here are some tax tips to help you with your upcoming tax returns. If you don't see the answer to your question here, or you have more questions, call us at Daniel W. Polachek, P.C. 413-584-5809
We'll be adding tips periodically, so check back now and then.

Click on the tax tip to get your answer .

Tax Tip #1
How to know if you should file a return

Tax Tip #2
Marriage and divorce affect taxes

Tax Tip #3
Planning to give? Think taxes first

Tax Tip #4
April 17 is an important tax due date!

Tax Tip #5
How long should you keep tax records?

Tax Tip #6
Fake IRS emails during tax season

Tax Tip #7
If you have a household employee, report wages

Tax Tip #8
Filing dates for nonprofit organizations

Tax Tip #9
Know if your hobby is taxable

Tax Tip #10
Tax benefits for adopting a child

Tax Tip #11
Estimate your 2018 tax liability

Tax Tip #12
Request an extension if you think you'll file late

Tax Tip #13
Don't forget to take your required minimum distribution (RMD)

Tax Tip #14
A tax break for working parents

Tax Tip #15
Tax return errors can be fixed

Tax Tip #16
Make the most of your tax refund

Tax Tip #17
Social Security wage base increase up from 2017

Tax Tip #18
Should you itemize your deductions?

Tax Tip #19
Your personal exemptions can be reduced

Tax Tip #20
Save more for retirement

Tax Tip #21
Do you have the right business entity?

Tax Tip #22
If you plan to sell, know the wash rule

Tax Tip #23
Growing older has tax advantages

Tax Tip #24
Understand education benefits – and don't miss out

Tax Tip #25
Protect your retirement funds during a job change

Tax Tip #26
Do Social Security benefits get taxed?

Tax Tip #27
Selling investments? Follow these 3 rules

Tax Tip #28
Homeowners save tax dollars

Tax Tip #29
No taxes on gifts up to $15,000

Tax Tip #30
Life changes? Consider making tax adjustments


#1 - How to know if you should file a return

You're usually not required to file a federal individual income tax return when your income is less than the sum of the standard deduction amount plus one exemption. For 2017, personal exemptions are $4,050. The standard deduction depends on your filing status and age. Exceptions apply, and you may need to file for other reasons. Questions? Give us a call.


#2 - Marriage and divorce affect taxes

Your marital status on Dec. 31 determines the tax status you'll claim on your return. If you're single or divorced on the last day of 2017, you will file as single. If you are legally separated and have at least one dependent child you can file as single or head of household. If you're legally married under state law, you can file jointly with your spouse or choose "married filing separately" status. If your spouse died during 2017 and you did not remarry, you can generally file a joint return.


#3 - Planning to give? Think taxes first

In planning donations to charity, consider giving long-term appreciated property instead of selling the property first and donating the cash. You'll get a deduction for the market value of the property without paying capital gains tax on the appreciation. Do the opposite with property that has lost value. Sell it to get the tax loss and give the money to charity for a deduction.

Call Us At 413-584-5809          Back To Top


#4 - April 17 is an important tax due date!

April 17, 2018, is the due date for filing your 2017 federal income tax return and for paying the tax you owe. The first installment of your 2018 estimated tax is due the same day. April 17 is also the due date for the first 2018 installment of estimated tax for corporations. Contact our office for any assistance you need.


#5 - How long should you keep tax records?

Keep your tax records for as long as you might be audited. Generally, that's three years after you file the return, though the IRS has six years to audit you if you've omitted more than 25 percent of your gross income from a return. There is no audit limit for fraudulent filings or for returns that were never filed.


#6 - Fake IRS emails during tax season

During tax filing time, identity thieves prey on taxpayers with fake emails that appear to be from the IRS. The emails link to sites that appear to be genuine. Individuals are asked for information that will enable the thieves to steal their identities. Do not respond to these emails. Instead, report them to the IRS at phishing@irs.gov.

Call Us At 413-584-5809          Back To Top


#7 - If you have a household employee, report wages

You may know of the payroll rules relating to household employees as the "nanny tax." These rules apply if you employed a housekeeper, nanny, gardener, or other household worker in 2017 and paid that worker $2,000 or more during the year. You may need to file payroll returns, as well as a special form with your income tax return. Contact us for help.


#8 - Filing dates for nonprofit organizations

To maintain exempt status, your nonprofit may need to file an information return or annual electronic notice. If either applies, the deadline for filing is the 15th day of the fifth month after your year-end. For calendar-year nonprofits, 2017 forms are due May 15, 2018. Call our office if you'd like help with your filing.


#9 - Know if your hobby is taxable

If you have a hobby that creates income, you must report that income to the IRS. However, you may be able to deduct expenses related to your hobby. This will depend on whether you pursue the activity just for fun or for a profit. The IRS has specific criteria to be used to distinguish hobbies from profit-motivated activities. We can help you figure out your tax liabilities for your hobby. Give us a call today.

Call Us At 413-584-5809          Back To Top


#10 - Tax benefits for adopting a child

If you've adopted a child, you know the process is both rewarding and costly. The adoption tax credit can reduce your 2017 tax bill by up to $13,570. Expenses that qualify for the credit include agency adoption fees, attorney fees, court costs and adoption-related travel expenses. If your income for 2017 exceeded $203,540, the credit is reduced. For details on this tax benefit, contact our office.


#11 - Estimate your 2018 tax liability

You're generally required to pay taxes as you earn the related income. You can pay what you owe by having additional federal income tax withheld from wages, Social Security, pensions and other income. If you're self-employed, you'll generally need to make estimated tax payments. The first payment is due April 17. We can help you figure out what you owe. Give us a call today.


#12 - Request an extension if you think you'll file late

If you can't file your 2017 federal income tax return by the April 17, 2018 deadline, ask for an automatic six-month extension. That will give you until Oct. 15 to complete your return. However, this extension doesn't give you more time to pay what you owe for 2017. Contact us for help determining your 2017 tax liability so you know how much to send with your extension request.

Call Us At 413-584-5809          Back To Top


#13 - Don't forget to take your required minimum distribution (RMD)

April 1 is an important date if you turned 70½ last year and decided to delay taking your first RMD from your IRA. You must take your first RMD by April 1 or face a 50 percent penalty tax on the amount not taken. If you're retired, this deadline also applies to other retirement plans, except for Roth IRAs. Contact our office for details.


#14 - A tax break for working parents

You could save with the child and dependent care credit if you work and pay someone to take care of a child or other dependent. The credit is based on your income and is available if you work full- or part-time. Credits are valuable because they reduce the tax you owe dollar-for-dollar. Call us for details.


#15 - Tax return errors can be fixed

You have a second chance if you accidentally omit taxable income or a tax deduction on your tax return. Same goes if you receive a corrected W-2 or 1099 after you've already filed your return. You can file an amended return for three years from the due date of the return, or two years after the tax is paid – whichever is later. If you owe money, there is no deadline on filing an amended return. If you need to amend, call us for help.

Call Us At 413-584-5809          Back To Top


#16 - Make the most of your tax refund

The best way to avoid squandering your tax refund is to have a plan for what you're going to do with it. Consider putting part of your refund in a readily accessible account (checking, savings or money market) to help you through short-term temporary setbacks. Or you might pay down high-interest credit cards, or use your refund to refresh career skills or to learn new ones. Call us for more money-saving ideas.


#17 - Social Security wage base increase up from 2017

If you're an employer, remember to adjust payroll calculations for 2018 wages. While the rate for Social Security tax is still 6.2 percent, the wage base for withholding the tax has increased to $128,700. That means you need to deduct 6.2 percent from the first $128,700 of employees' wages. Remember there's no wage base for the basic Medicare portion of the FICA tax. You'll withhold that on all wages.


#18 - Should you itemize your deductions?

Itemizing deductions can take some work, but it may pay off. Doing so for home mortgage interest, out-of-pocket medical expenses, certain taxes and charitable contributions makes sense (in most cases) when the total of allowable deductions exceeds the standard deduction. For 2017 returns, the standard deduction is $12,700 if you're married and filing a joint return and $6,350 when you're single. Call us for a complete review of deductible expenses.

Call Us At 413-584-5809          Back To Top


#19 - Your personal exemptions can be reduced

The personal exemption you claim for yourself, your spouse and your dependents will begin to phase out (or be reduced) if you're married filing a joint return and your adjusted gross income exceeds $320,000 for 2018 ($266,700 for singles). These thresholds are adjusted for inflation each year.


#20 - Save more for retirement

Retirement plan contributions save tax dollars by reducing your taxable income and by providing tax-deferred growth. For 2018 you can contribute up to $18,500 to your 401(k). You can add an additional $6,000 if you are 50 or older. If you participate in a SIMPLE plan, the maximum contribution for 2018 is $12,500, plus a catch-up contribution of $3,000 when you're 50 or older.


#21 - Do you have the right business entity?

The business entity your company operates under can have a significant effect on the taxes you pay, as well as your costs of doing business. As your company grows or changes, it may be a good idea to switch to a different entity. Entity choices include sole proprietor, partnership, C or S corporation and LLC. Give us a call for help determining what the best business entity is for your situation.

Call Us At 413-584-5809          Back To Top


#22 - If you plan to sell, know the wash rule

Do you plan on selling a stock, bond or mutual fund to take a tax loss? You'll need to review the wash sale rule. This rule kicks in if you sell a security at a loss and then buy the same or a substantially identical security within 30 days before or after the sale. The rule prohibits you from deducting the loss on your current-year return. The rule also applies to transactions that span different years, as well as taxable and tax-deferred accounts.


#23 - Growing older has tax advantages

As you age, new tax breaks become available to you. Some breaks include qualifying for a higher standard deduction, higher contribution limits to an IRA or HSA (health savings account) and not paying income tax on some or all of your Social Security benefits. To identify all the tax breaks available to you at any age, give us a call.


#24 - Understand education benefits – and don't miss out

Did you know that federal tax benefits for education include credits, deductions, tax-deferred accounts and exclusions from income? The American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) are examples. Each dollar of a credit reduces your tax bill by a dollar. Deductions reduce your taxable income. Tax-deferred accounts let savings grow with no tax due until distributions are taken. And income exclusions provide benefits without increasing your taxable income.

Call Us At 413-584-5809          Back To Top


#25 - Protect your retirement funds during a job change

Don't cash out your retirement plan if your employment status changes. If you do, you may owe federal income tax and a penalty. Instead, you may be able to leave the money in your former employer's plan or set up a direct rollover to your new employer's plan or an IRA.


#26 - Do Social Security benefits get taxed?

The answer depends on your total income from all sources (including tax-exempt interest), as well as your filing status. When Social Security is your only income, benefits are generally not taxable. If you have income from other sources as well, up to 85 percent of your benefits can be taxable. Give us a call with questions about your taxable benefits.


#27 - Selling investments? Follow these 3 rules

Keep in mind these three capital gains rules when you sell investments: 1) The date of a stock sale is also the trade date. 2) Your basis may be increased by reinvested mutual fund dividends. 3) You can use up to $3,000 of the excess to offset other income when capital losses exceed capital gains. If your losses are greater than $3,000, you can use the extra amount to reduce your taxable income in future years.

Call Us At 413-584-5809          Back To Top


#28 - Homeowners save tax dollars

If you itemize, you can claim deductions for real estate taxes and mortgage interest, including points you paid on the home purchase. You may also be able to take a medical deduction for special equipment or improvements installed in your home if the main purpose is medical care for you, your spouse or your dependent. Call us for a more complete review of tax breaks for homeowners.


#29 - No taxes on gifts up to $15,000

In 2018, you can give anyone up to $15,000 ($30,000 if you're married) by Dec. 31 without having to pay gift tax or file a gift tax return. The gift tax exclusion is annual and can be adjusted for inflation. In contrast, the gift tax exemption is a lifetime limit. It includes the total amount you can give away (free of gift taxes) over your lifetime.


#30 - Life changes? Consider making tax adjustments

Having a child, getting promoted or buying a home are all reasons you may need to make tax adjustments in 2018. That could mean adjusting your withholding or increasing retirement plan contributions. We can help you determine what needs to be adjusted to ensure you are in the best position when it's time to file. Give us a call.

Call Us At 413-584-5809          Back To Top

Check the background of this financial professional on FINRA's BrokerCheck
Check the background of this financial professional on FINRA's BrokerCheck