Tax season is stressful. While we cannot guarantee your stress to melt away, the Internal Revenue Service (IRS) provides information to make things a little easier for employees and business owners. These resources are free to the public and are must-reads for anyone involved with a company-sponsored retirement plan.
1. IRS Withholding Calculator
The withholding calculator can help employees determine whether they need to give their employer a new Form W-4. This can help you avoid having too much or too little Federal income tax withheld from your pay. You can use your results from the calculator to help fill out the form.
- Things you will need handy are:
- · Your most recent pay stubs
- · Your most recent income tax return
- · Estimate values if necessary
Remember that the results will be no more accurate than the input you provide.
2. 401(k) Plan Information
A 401(k) is a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts. 401(k)s may rely on employee participation, but many include employer-matching elements.
If you enroll in a 401(k), it is essential to evaluate the best 401(k) saving practices. If not, you may be missing out on free or tax-free money.
3. Mileage Rates
The IRS provides essential information for calculating mileage rates. Unfortunately, mileage rates are not a one-size-fits-all situation. The IRS outlines optional standard mileage rates for employees, self-employed individuals, or other taxpayers on their website. This automobile must operate for business, charitable, medical, or moving purposes only.
These rates sometimes apply to employees but can also apply to business owners.
4. Home Office Deductions
If you use part of your home exclusively and regularly for conducting business, you may be entitled to deduct expenses with home office deductions. Home office deductions can apply to repairs, utilities, mortgage, depreciation, and other areas of your home.
All you need to do is calculate what percentage of your home is regularly and exclusively used for your business needs. The IRS provides resources and forms to determine the percentage of your home devoted to your business activities.
5. Earned Income Tax Credit
The Earned Income Tax Credit (EITC), is a benefit for working people with low to moderate income. EITC reduces the amount of tax you owe and may give you a refund based on your income. The IRS will help you determine if you qualify for EITC, and provides resources such as the EITC Assistant and Income Limits for the current year. This is a no-brainer for those looking to qualify for an extra tax break. Simply view the requirements and start the application process.
6. Child and Dependent Care Credit
You may be able to claim the Child and Dependent Care Credit if you paid expenses for the care of a qualifying individual to enable you (and your spouse, if filing a joint return) to work or actively look for work.
This credit only applies to dependents who are:
- · Under 13 years of age,
- · A spouse who was physically or mentally unable to provide self-care, or
- · An individual who was physically or mentally unable to provide self-care who lived with you for more than half the year.
The amount of credit is updated annually so be sure to check for new developments to ensure you qualify.
Use Form 2441 to apply.
For more tips and information regarding retirement plans, contact us.
