Things to know about the new income tax return forms
Having dropped the controversial provision for mandatory disclosure of foreign trips and dormant bank accounts, the Finance Ministry has finally come out with new and simplified income tax return (ITR) forms. The simplified ITR forms have been brought after the earlier version was opposed by the industry, MPs and assessees for its cumbersome disclosure norms.
The ITR forms, which were notified last month by the CBDT for the current assessment year, had specific columns for banks accounts, IFSC Code, names of joint account holders and foreign visits, including the ones paid by companies.
The good news now is that apart from doing away with some controversial provisions, the new forms — ITR 2 and ITR 2A — will have only three pages and other details will have to be filled in schedules, according to a Finance Ministry statement issued recently
Providing a big relief to assessees, the new ITR forms have been reduced to three. “The number of pages for the new ITR forms has been reduced from 14 pages to 3, making it easier for income tax assesses. The new forms, known as ITR 2 and ITR 2A, will therefore consist of only 3 pages. Any other details that must be filled will have to be included in schedules,”
Currently individuals/HUFs with income from more than one house property and capital gains are required to file Form ITR-2. “A new ITR 2A form is proposed which can be filed by an individual/HUF that has income from more than one house property, but does not have any income from capital gains, income from business/profession, foreign assets/foreign income,” says
Things You Absolutely Need To Know About Taxes
Tax Day comes around just once a year (it’s April 18 in 2016) but staying on top of taxes can feel like a year-round job. Whether you file on your own or use a tax professional, you need to know what your filing obligations might be and how your choices can affect your bottom line when it comes to money
Here are the 10 Things You Absolutely Need To Know About Taxes:
You may not have to file a federal income tax return. Not every person who receives income during the calendar year has to file a federal income tax return. There are a number of factors that affect whether you have to file including how much you earned – and the source of that income – as well as your filing status and your age. For most taxpayers, the quick “cheat sheet” formula is this: find your standard deduction and add your personal exemption to that number. You can find those numbers here.
Even if you don’t need to file a federal income tax return, you may still want to take advantage of tax breaks and credits. Tax credits are dollar for dollar reductions in your tax due and are usually more beneficial than tax deductions which simply reduce your taxable income. Additionally, sometimes, as with the American Opportunity Credit (AOC) you can get money back with credits even if you don’t owe any tax. If you’re still in school, you may be able to claim the AOC (now permanent) for qualified expenses (generally, tuition and fees): the maximum credit is $2,500 per eligible student and up to 40% may be refundable. The earned income tax credit (EITC) is a benefit for working people with low to moderate income. Despite popular opinion, having kids isn’t a prerequisite but it does increase the benefit: you can claim a credit of up to $503 with no qualifying children and up to $6,242 with three or more qualifying children (click here for more on EITC rates and limits for 2015).
You don’t have to itemize to take advantage of certain deductions like the student loan interest deduction. To take advantage of most deductions, you have to itemize – and most taxpayers (2/3) don’t itemize. But all is not lost. The IRS still allows for certain deductions (called adjustments to income) that you don’t have to itemize to claim: that handful of deductions can be found at the bottom of the front page of your form 1040. Among the most popular? The student loan interest deduction, the IRA deduction
f you’re self-employed, you likely need to make estimated payments. Our tax system is considered “pay as you go.” If you’re employed, your employer will withhold taxes from your paycheck and turn those over to the Internal Revenue Service (IRS) for you as you get paid: at the end of the year, you’ll either owe more, break even or be owed a refund, depending on your financial situation. But what if you don’t have an employer or you get paid without having federal income taxes withheld? The IRS expects you to do the work and pay up if you expect to owe more than $1,000 at tax time. This applies not only to the self-employed (including freelancers) but also to landlords, S corporation shareholders, partners in a partnership and taxpayers with significant investments – almost anyone that gets a form 1099. To make estimated payments, you’ll use federal form 1040ES, Estimated Tax for Individuals (downloads as a pdf). Estimated taxes must be paid quarterly. If you skip a payment or pay late, you may be subject to a penalty.
How to File Your State and Federal Taxes for Free
TurboTax and other tax prep services advertised themselves as “free,” but we found several ways that they tricked people into paying. Here’s our guide to preparing and filing your taxes without falling into a trap.
Most Americans are eligible for free tax preparation services, but the truly free options can be hard to find. If you’re not careful, you could end up using a service that says it’s free but demands payment after you’ve spent time entering your information.
How do you file online for free?
If you make less than $69,000 a year, you can find free tax filing options at the IRS Free File webpage. There are options from TurboTax, H&R Block, TaxSlayer and others. Each site has its own eligibility requirements, so be sure to find one that will be free for you.
If you’re in the military, you can use MilTax, a service provided by the Department of Defense that uses a version of H&R Block’s tax software. It is available for free to active-duty service members as well as those in the Guard or Reserves, as well as their families. There are no income or tax form restrictions.
How can I get in-person tax help for free?
You can qualify for the IRS’ Volunteer Income Tax Assistance (VITA) program if you:
Make less than around $56,000 a year, OR
Live with a disability, OR
Speak limited English
Key Elements of the U.S. Tax System
Q.What are the tax benefits of homeownership?
A.The main tax benefit of owning a house is that the imputed rental income homeowners receive is not taxed. Although that income is not taxed, homeowners still may deduct mortgage interest and property tax payments, as well as certain other expenses from their federal taxable income if they itemize their deductions. Additionally, homeowners may exclude, up to a limit, the capital gain they realize from the sale of a home.
The tax code provides several benefits for people who own their homes. The main benefit is that the owners do not pay taxes on the imputed rental income from their own homes. They do not have to count the rental value of their homes as taxable income, even though that value is just as much a return on investment as are stock dividends or interest on a savings account. It is a form of income that is not taxed.
IMPUTED RENT
Buying a home is an investment, part of the returns being the opportunity to live in the home rent free. Unlike returns from other investments, the return on homeownership—what economists call “imputed rent”—is excluded from taxable income. In contrast, landlords must count as income the rent they receive, and renters may not deduct the rent they pay. A homeowner is effectively both landlord and renter, but the tax code treats homeowners the same as renters while ignoring their simultaneous role as their own landlords. The US Department of the Treasury, Office of Tax Analysis (OTA) estimates that the exclusion of imputed rent reduced federal revenue by nearly 121.3 billion in fiscal year 2019.
MORTGAGE INTEREST DEDUCTION
Homeowners who itemize deductions may reduce their taxable income by deducting interest paid on a home mortgage. Taxpayers who do not own their homes have no comparable ability to deduct interest paid on debt incurred to purchase goods and services.
PROPERTY TAX DEDUCTION
Homeowners who itemize deductions may also reduce their taxable income by deducting property taxes they pay on their homes. That deduction is effectively a transfer of federal funds to jurisdictions that impose a property tax (mostly local but also some state governments), allowing them to raise property tax revenue at a lower cost to their constituents. The OTA estimates that the deduction saved millions of homeowners a total of $6 billion in income tax in fiscal year 2019. The cost of that deduction went way down because of the TCJA, as many fewer homeowners itemized and because the TCJA put an overall cap of $10,000 on the state and local taxes that taxpayers can deduct.
E-SERVICES INFORMATION
Tax Online is the convenient and secure way to e-file tax returns, make payments, review letters, manage your accounts, and conduct other common transaction online
Income Tax Refund Status
Where’s My Refund Search allows taxpayers to check the status of their individual income tax refunds 9-10 weeks after submitting a tax return. Status information is updated once a day.
Search Business Tax Licenses
Use the Search Tax Licenses feature on Tax Online to search for names, Hawaii Tax ID numbers, and status of business taxpayers issued a tax permit, license, or account.
IRS MODERNIZED E-FILE PROGRAM
The State is a participant in the Internal Revenue Service’s Modernized e-File (MeF) program, which allows income tax taxpayers to electronically file their federal and state income tax returns using approved tax preparation software or authorized tax professionals. Individual and Corporate Income tax returns can be filed through the software products or tax professionals approved for this program. Please contact vendors directly for any problems you encounter with their products or services.