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Miscellaneous Tax Information
Gift Returns: You do not need to file a gift tax return, Form 709, if you did not give more than $14,000 to any one person other than your spouse during 2016. If you are married, then you and your spouse can gift a total of $28,000 to any person without having to file a gift tax return.
Alternative Minimum Tax: Remember to consider the Alternative Minimum Tax (AMT) when doing your tax planning. Large unreimbursed job expenses, medical expenses, incentive stock options, and state tax payments are common reasons for the AMT to be triggered on your tax return.
Tax Fraud: If you know about a tax fraud being committed, you can notify the IRS by completing Form 3949-A which can be downloaded from the IRS web site, www.irs.gov. You can remain anonymous to the IRS by simply not filling in your contact information on Section C of the Form 3949-A. The IRS does not require your contact information to be filled out to investigate a claim.
National Guard: National Guard members or Armed Forces Reservists who travel over 100 miles away from home for drills or meetings can deduct their unreimbursed travel expenses as an adjustment to income on page 1 of the Form 1040. Allowable expenses include meals, lodging, and automobile expense. For automobile expense, the standard mileage rate for 2016 is 54.0 cents per mile. The amount of the allowable expenses cannot exceed the per diem rates that federal government employees receive for travel expenses.
Combat Pay: Combat pay is tax-exempt and won't be on your tax return. However, Congress didn't want to take away the Earned Income Credit and Additional Child Tax Credit for military members in combat situations. When calculating the Earned Income Credit and Additional Child Tax Credit, a taxpayer with combat pay will include the combat pay as income just for purposes of these two credits. You calculate your Earned Income Credit and Additional Child Tax Credit the regular way without including combat pay, then you calculate your Earned Income Credit and Additional Child Tax Credit including your combat pay as income. Then you use the higher of the two calculations for your credits. For example, if the only income you have is combat pay and you have a child who is eligible for the Earned Income Credit, you are going to receive a higher Earned Income Credit by including your combat pay in the Earned Income Credit calculation. If you have other sources of wages and the combat pay decreases the amount of Earned Income Credit, then you would use the regular Earned Income Credit calculation.
Health Savings Account: If you are covered by a high deductible health plan, you or your employer can set up a Health Savings Account (HSA). Contributions made by your employer to your HSA are excluded from your wages income. Contributions you make yourself to your HSA are deducted as an adjustment to income on page 1 of your Form 1040. Money that is not spent for medical costs stays in the account from year to year. Unlike cafeteria plans where unused health care money is forfeited at the end of the year, you don't have to use your HSA money during the year. The unused HSA money rolls forward from year to year and can be invested in stocks, bonds or other investments and the investments grow tax-deferred like an IRA. The unused HSA funds will be available for future health care costs.
Household Employees: Schedule H is used to report payroll taxes for household employee's wages. Schedule H needs to be filed if you answer yes to any of the following three questions:
(1) Did you pay any one household employee cash wages of 2000 or more in 2016?
(2) Did you withhold Federal income tax during 2016 for any household employee?
(3) Did you pay total cash wages of $1,000 or more in any calendar quarter of 2015 or 2016 to household employees?
You do not need to file Schedule H if the household help are employees of a company that specializes in household services such as "Molly Maids Inc.". In that case, the household employees are considered to be employees of the company and not your employees.
You don't have to pay Social Security or Medicare taxes on the wages of a household employee who is under the age of 18 and a student. You also do not have to pay Social Security or Medicare taxes for wages paid to your spouse, your child under age 21, or your parent (exception may apply to your parent).