KNOXVILLE (WATE) – The 2017 tax season is nearly here. Soon, you’ll be getting the information you need to settle up your 2016 tax return with Uncle Sam. You should make sure to take advantage of all of the tax benefits available to you.
The first thing you want to do is get organized. It’s important to have one place, perhaps a large envelope or a file folder, so when it is finally time to fill out the tax return, a lot of information is in one place.
If your employer offers a 401(k) or other type of deferred pension plan, make every effort to contribute the maximum amount allowable, especially if your employer contributes to the plan. Otherwise you are leaving money on the table that could benefit you in your retirement. Even if there is no employer match, all of the funds are tax-deferred and grow tax-free.
Check your year-to-date withholding and consider changing the taxes withheld if you are expecting a large refund. This is especially important if you are claiming the earned income tax credit, or EITC, or the additional child tax credit. The IRS is now required to hold all refunds on those returns until February 15. The new law was put into place to allow the agency additional time to detect and prevent tax fraud.
According to the IRS, one out of every five workers, or 20 percent, fails to claim the very valuable earned income tax credit. If you worked and earned less than $53,505 in 2016, the limit is increased and will be $53,930 in 2017. Use the EITC Assistant tool to determine if you qualify for the credit. You must file a return in order to receive the credit. So, don’t miss out on this!
If you, your spouse or dependents had higher education costs in 2016, you may qualify for some tax savings. In fact there are multiple benefits available. The only difficult part is figuring out which one works best in your situation. There are three different benefits: the American opportunity credit, the lifetime learning credit and the tuition and fees deduction.
There are various requirements that may limit the benefit, but the IRS once again offers a useful tool: the Interactive Tax Assistant tool to help you find your way through the maze. You should receive Form 1098-T, that’s the Tuition Statement, from your school, then you’ll need to complete Form 8863, the Education Credits form.
Finally, there is health insurance. The shared responsibility provision requires that you and your family have minimum essential coverage or qualify for a health coverage exemption. So, you need to do one thing: check the box that indicates you had health care coverage for all of 2016. If that is not the case, or you received advance payments of the premium tax credit on the marketplace, then you may need to fill out Form 8965, Health