If you withdraw money from a 401(k) or an IRA before age 59 ½, the distribution is taxable and there is a 10% penalty on the taxable amount. The main exceptions that let you withdraw money early without penalty are as follows: • Qualified retirement plan distributions if you separated from service in or after the year you reach age 55 (does not apply to IRAs). ​​• Distributions in 2020 up to $100,000 for COVID-19-related purposes. • Distributions made as a part of a series of substantially equal periodic payments (made at least annually) for your life or the joint lives of you and your designated beneficiary. • Distributions due to total and permanent disability. • Distributions due to death (does not apply to modified endowment contracts) • Qualified retirement plan distributions up to (1) the amount you paid for unreimbursed medical expenses during the year minus (2) 7.5% of your adjusted gross income for the year. • IRA distributions made to unemployed individuals for health insurance premiums. • IRA distributions made for higher education expenses. • IRA distributions made for the purchase of a first home (up to $10,000). • Distributions due to an IRS levy on the qualified retirement plan. • Qualified distributions to reservists while serving on active duty for at least 180 days.

Don’t panic! ​The first thing to do is carefully read the notice​to determine why it was sent and what the IRS wants you to do. It may be nothing of importance; it may even be a notice in your favor. After reading it you should bring it to our attention as soon as possible.

When you get married you will have the option of filing a joint tax return. In this case the one return will report the income and deductions of both spouses. The IRS has eliminated most cases where you would have saved taxes by remaining single. You also have the option to file as married filing separately, but in most cases this will increase your taxes.

The IRS recommends you should keep your records and tax returns for at least 3 years from the date the return was filed or the date the return was required to be filed, whichever is later. ​We recommend that you retain your records longer if there are items being depreciated or to keep a record of the cost basis of investments.

Keep a log in your vehicle and record the purpose and mileage of each trip. You also need to record the odometer readings at the beginning and end of each year, as the IRS will ask you for total miles driven during the year. Keep your repair bills as these normally record odometer readings when the car is serviced.

An amended return is simply a return filed with the IRS and/or state because of an error or an omission on your original return. You should file an amended return if there is a material difference between the original return and your new changes. ​As of now, an amended return older than 2019 cannot be electronically filed, and any expected refunds will take longer to receive than the original return (7-9 months, according to the IRS). Generally to claim a refund, your amended return must be filed within 3 years from the date of your original return or within 2 years from the date you paid the tax, whichever is later.

If you make a cash donation, you must have a bank record or written communication from the charity showing the name of the charity and the amount of the donation. A bank record can be the cancelled check or a statement from a bank or credit union—so long as it lists the charity’s name, the date, and the amount of the contribution. Personal records such as bank registers, diaries and notes are no longer considered acceptable proof of contributions. Any used items (such as clothing, linens, appliances, etc.) must be in good condition and may only be deducted at the price you could reasonably ask for the item in used condition. For contributions worth $250 or more, you must have a written receipt or letter from the organization. For contributions worth $500 or more, you must file Form 8283 (Noncash Charitable Contributions) and attach it to your Form 1040. All contributions must be made to qualified charitable organizations.

No, you can file either as married filing joint or married filing separate. If you file separately your taxes will most likely be higher. Many credits—such as earned income, education (Hope and lifetime learning), and child care—are not allowed when you file separately. There are special circumstances where people who are married but either do not want to or cannot file with their spouse can file as Head of Household, which therefore entitles them to these credits and a lower tax bracket. In order to qualify as a Head of Household you must meet the following conditions: ​​You lived apart from your spouse for the last six months of the tax year. Temporary absences for special circumstances, such as for business, medical care, school, or military service, count as time lived in the home. You filed a separate return from your spouse. You paid over half the cost of keeping up your home for 2020. Your home was the main home of your child for over half of the year. You can claim this child as your dependent. If you do not meet all these conditions but are legally separated as of the last day of the year, you may also qualify to file as single.

The child tax credit is a credit of $2000 per child from the IRS. In order to qualify the child must: ​Be under 17 at the end of the tax year ​Be a citizen of the United States ​Be your child ​Live with you for more than half the year ​Not be treated as the qualifying child of someone else

If you use a portion of your home for business purposes, you may be able to take a home office deduction whether you are self-employed or a statuatory employee. Expenses you may be able to deduct for business use of your home may include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, depreciation, painting, and repairs. You can claim this deduction only if you use a part of your home regularly and exclusively: • As your principal place of business for any trade or business. • As a place to meet or deal with your patients, clients or customers in the normal course of your trade or business. Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction will be limited if your gross income from your business is less than your total business expenses.

If we filed your return, bring the new tax documents to our office. We will determine if it is necessary for you to file an amended return.

Following is a list of some more common items you should bring if you have them. *Wage statements (Form W-2) *Pension, or retirement income (Forms 1099-R) *Self-Employment Income (may show on forms 1099-K, 1099-MISC, or 1099-NEC) *Income and expenses from rentals *Investment Income (forms 1099-INT, 1099-DIV, 1099-B) *State Unemployment or Refund (1099-G) *Educational expenses (1098-T) *Healthcare Marketplace (1095-A) *Last year's tax return information *Dependents' Social Security numbers and dates of birth *Child care expenses and provider information *Lottery and/or gambling winnings and losses *Record of purchase or sale of real estate *Cancelation of Debt 1099-C *Any other items that you think may be necessary for your taxes.

If you can afford to pay the amount you owe, it should be paid. But many times that is not the case. If you cannot afford to pay, you have several options. Ignoring the IRS should not be one of them! The first option is to enter into an installment agreement with the IRS. To do this you need to fill out Form 9465, Installment Agreement Request. This form is fairly easy to complete, but we strongly recommend that if you owe a substantial amount of money you work with us to secure your agreement.​ The second option, which is much harder to get approved, is an offer in compromise. The IRS will be reluctant to do this if they feel you have the resources to eventually pay. You should not attempt an offer in compromise without professional help you can trust. The IRS has also issued a consumer alert, advising taxpayers to beware of promoters’ claims that tax debts can be settled for “pennies on the dollar” through the Offer in Compromise Program.

Usually if your income including social security benefits is less than $25,000 (single) or $32,000 (married), your benefits are not taxable. If your income is higher than those limits, there are formulas to determine what percentage of your social security is taxable. Currently up to 85% of your social security may be taxable.