Don’t Wait Until October

Mary Ann Adams | September 14th, 2015
Mary Ann Adams (Photo by Mykel Media Company)

Mary Ann Adams (Photo by Mykel Media Company)

October 15, 2015, is the last day to file your 2014 tax returns for most individuals who requested an automatic six-month extension. However, you can file any time before Oct. 15, if you have all your required tax documents.

As you prepare to file your 2014 tax return, there are some things that you should keep in mind:
How Health Care Laws could affect your taxes. The Affordable Care Act requires you, your spouse, and your dependents to have qualifying health insurance for the entire year, report a health coverage exemption, or make a payment when you file. If you purchased coverage through the marketplace, you may be eligible for the premium tax credit and need to use Form 8962 to reconcile any advance payments made on your behalf.

If you do not file a 2014 tax return you will not be eligible for advance payments or cost-sharing reductions to help pay for your marketplace health insurance coverage in 2016. Filing as soon as possible, using your most current Form 1095-A, Health Insurance Marketplace Statement, will substantially increase your chances of avoiding a gap in receiving this help.

Don’t Forget the Oct. 15 Deadline. If you aren’t ready to file yet, remember to file by Oct. 15, to avoid a late filing penalty. If you owe and can’t pay all of your taxes, pay as much as you can to reduce interest and penalties for late payment. In most cases, the failure-to-file penalty is 10 times more than the failure-to-pay penalty. So if you can’t pay in full, you should file your tax return as soon as you can and pay as much as you can.

More Time for the Military. Some people have more time to file. This includes members of the military and others serving in a combat zone. If this applies to you, you typically have until at least 180 days after you leave the combat zone to both file returns and pay any taxes due.

Back-to-School Education Tax Credits
With school starting, if you, your spouse or a dependent are enrolled in college this fall, you may be able to claim a tax credit on your federal tax return. Here are some key IRS tips that you should know about the education tax credits:

  • American Opportunity Tax Credit. The AOTC is worth up to $2,500 per year for an eligible student. You may claim this credit only for the first four years of higher education. Forty percent of the AOTC is refundable. That means if you are eligible, you can get up to $1,000 of the credit as a refund, even if you do not owe any taxes.
  • Lifetime Learning Credit. The LLC is worth up to $2,000 on your tax return. There is no limit on the number of years that you can claim the LLC for an eligible student.
  • One credit per student. You can’t take more than one education benefit for the same student and the same expenses. In other words, you can’t take the AOTC or LLC for the same student in the same tax year. Also, if the student receives tax-free educational assistance, such as a grant, you need to subject that amount from the qualified education expenses.
  • Qualified expenses. You may use qualified expenses to figure your credit. These include the costs you pay for tuition, fees and other related expenses for an eligible student. If you’re not sure what qualified expenses you can talk with a tax professional.
  • Form 1098-T. In most cases, you should receive Form 1098-T, Tuition Statement, from your school by Feb. 1, 2016. This form reports your qualified expenses to the IRS and to you. The amounts shown on the form may be different than the amounts you actually paid. That might happen because some of your related costs may not appear on the form. For instance, the cost of your textbooks may not appear on the form. However, you still may be able to include those costs when you figure your credit. Don’t forget that you can only claim an education credit for the qualified expenses that you paid in that same tax year.
  • Income limits. These credits are subject to income limitations and may be reduced or eliminated, based on your income.
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