Things You Should Know about Filing Late and Paying Penalties

April 18 was this year’s deadline for most people to file their federal tax return and pay any tax they owe. If you are due a refund there is no penalty if you file a late tax return. If you owe tax, and you failed to file and pay on time, you will most likely owe interest and penalties on the tax you pay late. To keep interest and penalties to a minimum, you should file your tax return and pay the tax as soon as possible. Here are some facts that you should know.

Two penalties may apply

One penalty is for filing late and one is for paying late. They can add up fast. Interest accrues on top of the penalties.

Penalty for late filing

If you file your 2015 tax return more than 60 days after the due date or extended due date, the minimum penalty is $205 or, if you owe less than $205, 100 percent of the unpaid tax. Otherwise, the penalty can be as much as five percent of your unpaid taxes each month up to a maximum of 25 percent.

Penalty for late payment

The penalty is generally 0.5 percent of your unpaid taxes per month. It can build up to as much as 25 percent of your unpaid taxes.

Combined penalty per month

If both the late filing and late payment penalties apply, the maximum amount charged for the two penalties is 5 percent per month.

File even if you can’t pay

Filing on time and paying as much as you can will keep your interest and penalties to a minimum. If you can’t pay in full, getting a loan or paying by debit or credit card may be less expensive than owing the IRS. If you do owe the IRS, the sooner you pay your bill the less you will owe.

Payment Options

Explore your payment options on the IRS website at IRS.gov/payments. For individuals, IRS Direct Pay is a fast and free way to pay directly from your checking or savings account. The IRS will work with you to help you resolve your tax debt. Most people can set up a payment plan using the Online Payment Agreement tool.

Late payment penalty may not apply

If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 18 due date.

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Claiming a Tax Deduction for Medical and Dental Expenses

Your medical expenses may save you money at tax time, but a few key rules apply. Here are some tax tips to help you determine if you can deduct medical and dental expenses on your tax return:

• Itemize. You can only claim your medical expenses that you paid for in 2015 if you itemize deductions on your federal tax return.
• Income. Include all qualified medical costs that you paid for during the year, however, you only realize a tax benefit when your total amount is more than 10 percent of your adjusted gross income.
• Temporary Threshold for Age 65.  If you or your spouse is age 65 or older, then it’s 7.5 percent of your adjusted gross income. This exception applies through Dec. 31, 2016.
• Qualifying Expenses.  You can include most medical and dental costs that you paid for yourself, your spouse and your dependents including:
  • The costs of diagnosing, treating, easing or preventing disease.
  •  The costs you pay for prescription drugs and insulin.
  • The costs you pay for insurance premiums for policies that cover medical care qualify.
  • Some long-term care insurance costs.

Exceptions and special rules apply. Costs reimbursed by insurance or other sources normally do not qualify for a deduction.

• Travel Costs Count.  You may be able to deduct travel costs you pay for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. If you use your car, you can deduct either the actual costs or the standard mileage rate for medical travel. The rate is 23 cents per mile for 2015.
• No Double Benefit.  You can’t claim a tax deduction for medical expenses paid with funds from your Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from those plans are usually tax-free.

What to Do if You Don't Receive Your Health Care Information Forms

This year, you may receive one or more forms that provide information about your 2015 health coverage; these forms are 1095-A, 1095-B and 1095-C. The IRS does not issue these forms and cannot provide you with a copy of any of these forms.

This tip provides guidance about what you should do if you are expecting to receive any of these forms, but do not have them by the time you are ready to file your tax return.

Form 1095-A, Health Insurance Marketplace Statement, provides you with information about your 2015 health care coverage if you or someone in your family enrolled in coverage through the Health Insurance Marketplace. The Marketplace should have furnished Form 1095-A to you by February 1, 2016.

• If you were expecting a form and did not get one, you should contact your Marketplace. Visit your Marketplace’s website to find out the steps you need to follow to get a copy of your Form 1095-A online.
• You should wait to file your 2015 income tax return until you receive this form. 
• Filing before you receive this form may delay your refund.  You need the information from Form 1095-A to complete Form 8962, Premium Tax Credit and file it with your tax return.
• You can find more information about your Form 1095-A from the Marketplace.

Form 1095-B, Health Coverage, provides you with information about your health care coverage if you, your spouse or your dependents enrolled in coverage through an insurance provider or self-insured employer last year. Coverage providers should furnish Form 1095-B to you by March 31, 2016.

• For questions about your Form 1095-B, contact the coverage provider. See line 18 of the Form 1095-B for a contact number.
• You might not receive a Form 1095-B by the time you are ready to file your 2015 tax return, and it is not necessary to wait for it to file.
• The information on these forms may assist in preparing a return, and you, however you can prepare and file your return using other information about your health insurance.

Form 1095-C, Employer-Provided Health Insurance Offer and Coverage Insurance, provides you with information about the health coverage offered by your employer.  In some cases, it may also provide information about whether you enrolled in this coverage. Employers that are required to issue Form 1095-C should furnish it to you by March 31, 2016.

• For questions about your Form 1095-C, contact your employer. See line 10 of Form 1095-C for a contact number.
• You might not receive a Form 1095-C by the time you are ready to file your 2015 tax return, and it is not necessary to wait for it to file.
• The information on these forms may assist in preparing a return. However you can prepare and file your return using other information about your health insurance.

Do not attach any Forms 1095 to your tax return.  Keep the health care information forms with your tax records.

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Tips for Deducting Gifts to Charity

If you plan to give and want to claim a tax deduction, there are a few tips you should know before you give. For instance, you must itemize your deductions. Here are six more tips that you should keep in mind:

1. Give to qualified charities. You can only deduct gifts you give to a qualified charity. Use the IRS Select Check tool to see if the group you give to is qualified. You can deduct gifts to churches, synagogues, temples, mosques and government agencies. This is true even if Select Check does not list them in its database.
2. Keep a record of all cash gifts.  Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift. The statement must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, or bank, credit union and credit card statements. If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document from your employer. It must show the total amount withheld for charity, along with the pledge card showing the name of the charity.
3. Household goods must be in good condition.  Household items include furniture, furnishings, electronics, appliances and linens. These items must be in at least good-used condition to claim on your taxes. A deduction claimed of over $500 does not have to meet this standard if you include a qualified appraisal of the item with your tax return.
4. Additional records required.  You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. Additional rules apply to the statement for gifts of that amount. This statement is in addition to the records required for deducting cash gifts. However, one statement with all of the required information may meet both requirements.
5. Year-end gifts.  Deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for the year the charge was made. This is true even if you don’t pay the credit card bill until the following year. Also, a check will count for the year it was written as long as you mail it in the same year.
6. Special rules.  Special rules apply if you give a car, boat or airplane to charity. If you claim a deduction of more than $500 for a noncash contribution, you will need to file another form with your tax return. Use Form 8283, Noncash Charitable Contributions to report these gifts.

Charitable contributions are a great way to give back to your community and support the work of the many non-profit organizations giving of their time and talent to better someones life. And, you might be able to take a tax deduction if you follow these tips!

It’s your money…