Things You Should Know about Filing Late and Paying Penalties

April 18 was this year’s deadline for most people to file their federal tax return and pay any tax they owe. If you are due a refund there is no penalty if you file a late tax return. If you owe tax, and you failed to file and pay on time, you will most likely owe interest and penalties on the tax you pay late. To keep interest and penalties to a minimum, you should file your tax return and pay the tax as soon as possible. Here are some facts that you should know.

Two penalties may apply

One penalty is for filing late and one is for paying late. They can add up fast. Interest accrues on top of the penalties.

Penalty for late filing

If you file your 2015 tax return more than 60 days after the due date or extended due date, the minimum penalty is $205 or, if you owe less than $205, 100 percent of the unpaid tax. Otherwise, the penalty can be as much as five percent of your unpaid taxes each month up to a maximum of 25 percent.

Penalty for late payment

The penalty is generally 0.5 percent of your unpaid taxes per month. It can build up to as much as 25 percent of your unpaid taxes.

Combined penalty per month

If both the late filing and late payment penalties apply, the maximum amount charged for the two penalties is 5 percent per month.

File even if you can’t pay

Filing on time and paying as much as you can will keep your interest and penalties to a minimum. If you can’t pay in full, getting a loan or paying by debit or credit card may be less expensive than owing the IRS. If you do owe the IRS, the sooner you pay your bill the less you will owe.

Payment Options

Explore your payment options on the IRS website at IRS.gov/payments. For individuals, IRS Direct Pay is a fast and free way to pay directly from your checking or savings account. The IRS will work with you to help you resolve your tax debt. Most people can set up a payment plan using the Online Payment Agreement tool.

Late payment penalty may not apply

If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 18 due date.

Still need to file your tax return? Call us at 888-660-4419 to schedule an appointment today!

Claiming a Tax Deduction for Medical and Dental Expenses

Your medical expenses may save you money at tax time, but a few key rules apply. Here are some tax tips to help you determine if you can deduct medical and dental expenses on your tax return:

• Itemize. You can only claim your medical expenses that you paid for in 2015 if you itemize deductions on your federal tax return.
• Income. Include all qualified medical costs that you paid for during the year, however, you only realize a tax benefit when your total amount is more than 10 percent of your adjusted gross income.
• Temporary Threshold for Age 65.  If you or your spouse is age 65 or older, then it’s 7.5 percent of your adjusted gross income. This exception applies through Dec. 31, 2016.
• Qualifying Expenses.  You can include most medical and dental costs that you paid for yourself, your spouse and your dependents including:
  • The costs of diagnosing, treating, easing or preventing disease.
  •  The costs you pay for prescription drugs and insulin.
  • The costs you pay for insurance premiums for policies that cover medical care qualify.
  • Some long-term care insurance costs.

Exceptions and special rules apply. Costs reimbursed by insurance or other sources normally do not qualify for a deduction.

• Travel Costs Count.  You may be able to deduct travel costs you pay for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. If you use your car, you can deduct either the actual costs or the standard mileage rate for medical travel. The rate is 23 cents per mile for 2015.
• No Double Benefit.  You can’t claim a tax deduction for medical expenses paid with funds from your Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from those plans are usually tax-free.

Personal Service...from Anywhere

File your taxes now. With modern technology, Daystar Tax Service is able to provide personal service to file your tax return no matter where you live. We can complete the details of your return over the phone for your convenience. We offer:

• Electronic signatures by email
• Square invoice payments using a debit or credit card
• Personal appointment times

It has never been easier to file your tax return! With our $20 Client Cash Referral Program, the sky is the limit - you can refer all of your friends and family and earn cash rewards!

Schedule your over the phone interview today!

It’s your money.

Tips for Deducting Gifts to Charity

If you plan to give and want to claim a tax deduction, there are a few tips you should know before you give. For instance, you must itemize your deductions. Here are six more tips that you should keep in mind:

1. Give to qualified charities. You can only deduct gifts you give to a qualified charity. Use the IRS Select Check tool to see if the group you give to is qualified. You can deduct gifts to churches, synagogues, temples, mosques and government agencies. This is true even if Select Check does not list them in its database.
2. Keep a record of all cash gifts.  Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift. The statement must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, or bank, credit union and credit card statements. If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document from your employer. It must show the total amount withheld for charity, along with the pledge card showing the name of the charity.
3. Household goods must be in good condition.  Household items include furniture, furnishings, electronics, appliances and linens. These items must be in at least good-used condition to claim on your taxes. A deduction claimed of over $500 does not have to meet this standard if you include a qualified appraisal of the item with your tax return.
4. Additional records required.  You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. Additional rules apply to the statement for gifts of that amount. This statement is in addition to the records required for deducting cash gifts. However, one statement with all of the required information may meet both requirements.
5. Year-end gifts.  Deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for the year the charge was made. This is true even if you don’t pay the credit card bill until the following year. Also, a check will count for the year it was written as long as you mail it in the same year.
6. Special rules.  Special rules apply if you give a car, boat or airplane to charity. If you claim a deduction of more than $500 for a noncash contribution, you will need to file another form with your tax return. Use Form 8283, Noncash Charitable Contributions to report these gifts.

Charitable contributions are a great way to give back to your community and support the work of the many non-profit organizations giving of their time and talent to better someones life. And, you might be able to take a tax deduction if you follow these tips!

It’s your money…

How to Get a Copy of Your Prior Year Tax Information

There are many reasons why you may need a copy of your tax return information from a prior year. New clients are encouraged to bring a copy of their prior year tax return to ensure all bases are covered when preparing the current year return. If you do not have a copy of your prior year tax return, you can request a transcript or copy from the IRS. Transcripts are free and available for the most current tax year after the IRS has processed the return. You can also get them for the past three tax years. If you don’t have your copy, the IRS can help. Here are the types of transcripts to choose from:

• Tax Return Transcript.  A return transcript shows most line items from your tax return just as you filed it. It also includes any forms and schedules you filed with your return. However, it does not reflect changes made to the return after you filed it. If you are applying for a mortgage, most mortgage companies require a tax return transcript and participate in the IRS Income Verification Express Service program. If you are applying for financial aid, you can use the IRS Data Retrieval Tool on the FAFSA website to import your tax return information to your financial aid application. In both of these cases, you won’t have to request a transcript directly from the IRS.
• Tax Account Transcript.  This transcript shows any adjustments made by you or the IRS after you filed your return. It shows basic tax return data, like marital status, type of return, adjusted gross income and taxable income, and other transactions such as payments you made.

Here’s how to get a transcript:

• Order Online. The fastest way to get a Tax Return or Account Transcript is through the ‘Get Transcript’ tool available on IRS.gov. Although the IRS temporarily stopped the online viewing and printing of transcripts, Get Transcript still allows you to order your transcript online and receive it by mail. Just click the “Get Transcript by Mail” button to have a paper copy sent to your address of record.
• Order by phone. You can also order by phone at 800-908-9946 and follow the prompts.
• Order by mail.  To order your tax return transcript by mail, complete and mail either Form 4506-T or Form 4506T-EZ. Form 4506-T can also be used to request other tax records: tax account transcript, record of account, wage and income and verification of non-filing.

If you need an actual copy of your tax return, they are generally available for the current tax year and as far back as six years. The fee per copy is $50. Complete and mail Form 4506 to request a copy of your tax return. Mail your request to the IRS office listed on the form for your area. If you live in a federally declared disaster area, you can get a free copy of your tax return. Visit IRS.gov for more disaster relief information.

Plan ahead. Delivery times for online and phone orders typically take five to 10 days from the time the IRS receives the request. You should allow 30 days to receive a transcript ordered by mail and 75 days for copies of your tax return.