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Furiously figuring your income taxes to beat this year’s tax filing deadline? If you’re still sorting receipts and penciling in numbers, it might be time to start thinking about an extension!

We say “might” because procrastinators still have the weekend plus two more days to wrap things up. The Internal Revenue Service will accept 2016 returns filed electronically or postmarked in the mail through the end of the day on Tuesday, April 18. (The extra time has to do with a holiday in Washington, D.C.)

If you still can’t make that deadline, it’s time to join the multitudes of taxpayers asking the Internal Revenue Service some extra days on Form 4868, named or “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.” The extension generally is automatic. For a copy of the form, see https://www.irs.gov/pub/irs-pdf/f4868.pdf.

The extension is automatic in most cases and adds another six months to the normal deadline. The IRS won’t ask you why you need it. BUT – and it can be a big “but” – the IRS still expects you to estimate income and pay any taxes due by the normal deadline.

The clock is ticking with this. Whether you’re sending it electronically or by “snail mail,” the extension form and any payments must be recorded or postmarked by the end of the day on April 18 to avoid penalties. The IRS notes special deadline rules can apply if you are in the military and served in a combat zone of if you are living outside the United States.

Finally, don’t forget any state taxes you owe. In Minnesota, you don’t have to file an extension form. BUT – just as with the federal return – you must pay an estimate of taxes due to avoid penalties. Minnesota Department of Revenue accepts tax payments through its Web site.

We at EricJohn Ltd. wish you easy and accurate filings for your 2016 tax return!

It’s now less than 3 weeks to the April 15th Tax Deadline, and we’ve got three letters to pass along to procrastinating taxpayers: IRA.

A contribution to your individual retirement arrangement is about the only new tactic available at this late date to shave some income off a 2016 return. Taxpayers can add money to their accounts or start a new IRA until their returns are due on April 18.

Most taxpayers can put as much as $5,500 into their accounts, and those over age 50 can bump that up to $6,500. On the standard Form 1040, look at Line 32, which is where IRA deductions take place.

There’s also a sweetener for many low and middle-income families. Any additions to various retirement accounts make them eligible for the Retirement Savings Contributions Credit, a relatively new tax credit based on IRAs. Check Line 51 on the Form 1040. The credit applies to marrieds with up to $61,500 in adjusted gross income and to singles making to $30,750.

For minimizing taxes, we’re mostly talking about the traditional IRA. Your yearly contribution goes into the account tax-free, but you pay federal tax on it and any gains when you withdraw money during retirement.

Taxpayers also can add to their Roth IRAs until April 18, but a contribution now won’t help to cut back income for 2016. That’s because Roth money never gets a tax break going into the account. However, contributions plus any gains are tax-free on the way out during retirement.

Here’s one little-noticed deadline that is important for baby boomers who turned age 70½ during 2016. The IRS deadline for starting required withdrawals from their traditional IRAs – and most other retirement-related plans – is April 1. They’ll have to work fast.

Let’s leave more details, such as income limits for contributions, etc., to the financial folks. If you have enough energy to go solo, they also are covered in IRS Publication 590-A. But don’t forget, too, that Eric Buechler, owner of EricJohn Ltd., can help taxpayers deploy those IRA contributions expertly in these last weeks of the tax season.

If your business pushes dirt around with machines or perhaps runs generators and power equipment at construction sites, sift back through your fuel receipts at tax time. You might dig up a write-off for your return!

Most farmers probably know that the diesel fuel running through their tractor is exempt from federal fuel excise taxes. But, many other small businesses, such as landscapers and building contractors, also can take advantage of the tax break given for off-highway use of gasoline and other fuels, EricJohn Ltd. owner Eric Buechler says. By the way, for 2016, those “other” fuels also include alternative mixtures, such as biodiesel and compressed natural gas.

Now, if you like to go off-roading for pleasure, enjoy yourself but don’t try this tax dodge. It’s only available for doing business, the Internal Revenue Service says. So, you generally can’t claim fuel for snowmobiles, all-terrain vehicles, chain saws, riding lawn mowers, etc. that are for personal use. Vehicles that must be licensed for highway use, such as pick-up trucks, also don’t qualify.

But landscape businesses can take tax credits for fuel used in bulldozers, digging equipment or even lawn mowers at job sites. (The amount varies with the type of fuel.) Likewise, construction contractors can write off part of the cost of gas or other fuel to power forklifts, compressors, power saws and machinery used in building.

To make the claim, you’ll have to declare gallons and types of fuel bought, and you (or your business) must be the “ultimate purchaser.” That’s done on IRS Form 4136, a four-page form showing fuels and deductible rates.

EricJohn Ltd. can guide small business owners through the ruts of the off-highway credit that are bogging them down.

As spring approaches, you might also want to know about one activity that does not work for fuel tax credits. In instructions for the IRS form, the tax collectors specifically say that “processing maple sap into maple syrup or maple sugar” is not considered farming, so it is not eligible for the tax break.

Yes, you’ve been filing the 1099 form for workers who aren’t directly on your payroll for years.  Well, make it quick this tax season – by Jan. 31. The Internal Revenue Service really wants to see your forms on time!

We’re talking about the 1099-MISC forms here and, specifically, the ones reporting $600 or more “nonemployee compensation” in Box 7. That applies to wages for independent contractors, commissions for independent sales representatives, professional fees, etc.

Here’s the big change. The deadline for making those 2016 reports to the IRS now is Jan. 31.  And it’s a firm Jan. 31. That’s earlier than in the past. The tax agency is promising penalties that start at $50 a day for each late form.

(We should point out that 1099-MISC forms that do not use Box 7 have until Feb. 28 for paper returns and March 31 for electronic returns before penalties kick in.)

Fortunately, businesses can get an automatic, 30-day extension by filing Form 8809 by paper or electronically by the end of the month.  You’ll be able to find the right place on that form; there’s a separate, boldfaced line just for “1099-MISC NEC” extensions.

If you’re thinking 1099s, you’re probably working on W-2 forms for company employees, too. They’re also due to the Social Security Administration on Jan. 31. But, this year the tax collectors are not allowing automatic extensions for filing W-2s beyond that date.  Businesses seeking extensions now must send in a “detailed explanation” – as the 8809 says — about why it’s going to take more time to submit their W-2s. The IRS also has boosted penalties for late W-2 filings. For more information on W-2s, check the “General Instructions for Forms W-2 and W-3“on the IRS website.

As tax firm Hawkins Ash CPAs wrote in discussing 1099s, the IRS actions trace back to the Protecting Americans from Tax Hikes Act of 2015 (nicknamed PATH).

The tax season opens on Monday, Jan. 23. We at EricJohn Ltd. are ready to guide small businesses and individuals through the ever-changing demands of their tax returns!

Yes, there’s still some good we Minnesotans can do for our 2016 tax returns — and for others —  before the famous crystal ball drops in Times Square this weekend.

MAKE a cash donation; CONTRIBUTE unneeded clothing, etc. to a favorite charity. After all, it is the season of giving!

Many probably know that charitable contributions can be deducted on federal tax returns, but that works only if Joe or Jane Taxpayer is able to itemize deductions. (That’s done on Schedule A of the IRS Form 1040, by the way.)

For Minnesotans, the federal return is not the only opportunity. Here, the state tax code allows a limited tax break for donations by taxpayers who did not itemize on the federal return. There’s no double-dipping allowed. In order to claim that tax break, Minnesota taxpayers must use the standard deduction on their federal 1040s instead of itemizing to figure their taxes.

Minnesota’s Department of Revenue calls it a “subtraction” instead of a deduction. Taxpayers can subtract half (50 percent) of their total contributions over $500. (The first $500 in donations cannot be subtracted.)

To take the subtraction, they file Minnesota Form M1M. It’s a dense form, with more than 30 additions and subtractions, so we’ll steer you to Line 18 for charitable contributions.

The $500 threshold applies to individual and married couples filing jointly. But married spouses filing separate returns each must reach $500 in donations before subtracting.

As far as donations themselves, the rules are the same as for federal returns. The key to deducting is fair market value, EricJohn Ltd. owner Eric Buechler notes.

Cash and credit card donations are obvious. The contribution is just the dollar amount given.

Clothing and other goods are valued in current condition – not at the price tag when purchased new. The Internal Revenue Service reminds us that household items and apparel must be in “good, used condition” to be acceptable.

Here are a few details about deducting charitable gifts:

• Eligible charities: The IRS maintains a database called “Select check” at https://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check . In addition, churches and government agencies that are not shown also qualify.
• Money donations:  A cancelled check or credit card statement with the name of the charity proves smaller donations. IRS wants an acknowledgment from the charity from $250 up.
• Household items: The charity’s statement is required for donations starting at $250. It’s best to get some type of acknowledgment slip for any donation.  But, especially, if dropped at an unattended site, make sure to have a written record of the items and their estimated values. Also, Eric suggests taking a smart phone photo of them as a back-up. If the charity supplies a receipt, try to take the photo with it and the item together.

Here it is. The Internal Revenue Service says taxpayers can start sending in 2016 income tax returns on Jan. 23 – about five weeks from now. That’s when the tax agency will start processing an estimated 153 million returns

Four out of five of them will arrive electronically, the tabulators at IRS say. Now, in case you’re wondering, you really can’t rush a refund along faster by filing an early paper return.  The IRS says it will start working through all its 2016 returns on the 23^rd.

So, when is this year’s due date? Well, the way the calendar falls, taxpayers once again will have another three days beyond the traditional deadline of April 15 to finish up. The filing deadline is Tuesday, April 18. That’s because Emancipation Day  is being observed in the District of Columbia on Monday, the 17^th  and the deadline cannot fall on that local holiday under current federal law.

Let’s talk refunds. For this tax season, we taxpayers generally can look forward to receiving refunds within 21 days, the agency says. But, as we told you last week, refunds from returns claiming the Earned Income Tax Credit or the Additional Child Tax Credit will not be available until at least Feb. 15.  As a practical matter, with the President’s Day weekend intervening, the week of Feb. 27 might be a better guideline for those refunds, even if they are sent by direct deposit, the IRS suggests.

Finally, one urgent note for any taxpayers using an Individual Taxpayer Identification Number (ITIN) instead of a Social Security number. Check on its expiration date. If it hasn’t been used on a tax return at least one time in the past three years, it expires on Jan. 1, 2017.  If so, move quickly to get it re-issued. Having an outdated number can delay processing and even interfere temporarily with some tax benefits, the IRS says.

Will you be well-prepared for the coming tax season?  We at EricJohn Ltd. are ready to prepare federal and state tax returns for individual taxpayers or small businesses. As an IRS-approved enrolled agent, owner Eric Buechler also can troubleshoot unforeseen problems.

Stay tuned, too. We’ll be talking more about tax issues in the coming months.

The Internal Revenue Service calls it “wrongful incarceration,” and the government may owe you a refund if you ever – any time in the past – paid federal income tax on payments that came out of it.

Until Dec. 19, anyone who had a conviction reversed and won damages is entitled to a complete refund of federal income taxes they paid on those awards. They could be from subsequent lawsuits, restitution or many other financial payments, as long as they relate to the “incarceration.”

Until last year, the people who had gotten out of jail still had to pay federal income taxes on those damages. But Congress ended that obligation last December.

Since then, IRS has allowed a wide-open window for claiming refunds. In short it hasn’t mattered when the taxes were paid in the past. But the year-long window closes on Dec. 19.

After then, people affected still will be able to claim refunds, but the normal deadlines will apply. (Normally, refund claims for tax years 2012 and earlier would not be allowed.)

There are some details to know.  For example, people claiming must have actually been convicted of a crime and then released, whether by court order, new trial or even by a pardon from a governor or the President.

The tax break might be small comfort for spending time in the slammer. But, this exclusion for wrongful incarceration also could mean a hefty chunk of refunds plus interest for those who paid taxes on this very unusual income!

Contact us at EricJohn Ltd. for this and other little-known niches of codes involving federal and state tax return.