To help you make sure you don’t miss any important 2017 deadlines, here’s a look at when some key tax-related forms, payments and other actions are due. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you.
Please review the calendar and let us know if you have any questions about the deadlines or would like assistance in meeting them.
File a 2016 individual income tax return (Form 1040) or file for a four-month extension (Form 4868), and pay any tax and interest due, if you live outside the United States.
Pay the second installment of 2017 estimated taxes, if not paying income tax through withholding (Form 1040-ES).
Pay the third installment of 2017 estimated taxes, if not paying income tax through withholding (Form 1040-ES).
If you’re the trustee of a trust or the executor of an estate, file an income tax return for the 2016 calendar year (Form 1041) and pay any tax, interest and penalties due, if an automatic five-and-a-half month extension was filed.
File a 2016 income tax return (Form 1040, Form 1040A or Form 1040EZ) and pay any tax, interest and penalties due, if an automatic six-month extension was filed (or if an automatic four-month extension was filed by a taxpayer living outside the United States).
Make contributions for 2016 to certain retirement plans or establish a SEP for 2016, if an automatic six-month extension was filed.
File a 2016 gift tax return (Form 709) and pay any tax, interest and penalties due, if an automatic six-month extension was filed.
Make 2017 contributions to certain employer-sponsored retirement plans.
Make 2017 annual exclusion gifts (up to $14,000 per recipient).
Incur various expenses that potentially can be claimed as itemized deductions on your 2017 tax return. Examples include charitable donations, medical expenses, property tax payments and expenses eligible for the miscellaneous itemized deduction.
Yes, there’s still time to make 2016 contributions to your IRA. The deadline for such contributions is April 18, 2017. If the contribution is deductible, it will lower your 2016 tax bill. But even if it isn’t, making a 2016 contribution is likely a good idea.
Benefits beyond a deduction
Tax-advantaged retirement plans like IRAs allow your money to grow tax-deferred — or, in the case of Roth accounts, tax-free. But annual contributions are limited by tax law, and any unused limit can’t be carried forward to make larger contributions in future years.
This means that, once the contribution deadline has passed, the tax-advantaged savings opportunity is lost forever. So it’s a good idea to use up as much of your annual limit as possible.
The 2016 limit for total contributions to all IRAs generally is $5,500 ($6,500 if you were age 50 or older on December 31, 2016). If you haven’t already maxed out your 2016 limit, consider making one of these types of contributions by April 18:
Deductible traditional. If you and your spouse don’t participate in an employer-sponsored plan such as a 401(k) — or you do but your income doesn’t exceed certain limits — the contribution is fully deductible on your 2016 tax return. Account growth is tax-deferred; distributions are subject to income tax.
Roth. The contribution isn’t deductible, but qualified distributions — including growth — are tax-free. Income-based limits, however, may reduce or eliminate your ability to contribute.
Nondeductible traditional. If your income is too high for you to fully benefit from a deductible traditional or a Roth contribution, you may benefit from a nondeductible contribution to a traditional IRA. The account can still grow tax-deferred, and when you take qualified distributions you’ll be taxed only on the growth. Alternatively, shortly after contributing, you may be able to convert the account to a Roth IRA with minimal tax liability.
Want to know which option best fits your situation? Contact us.
Here are some of the key tax-related deadlines affecting businesses and other employers during the first quarter of 2017. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.
• File 2016 Forms W-2, “Wage and Tax Statement,” with the Social Security Administration and provide copies to your employees.
• File 2016 Forms 1099-MISC, “Miscellaneous Income,” reporting nonemployee compensation payments in Box 7 with the IRS, and provide copies to recipients.
• File Form 941, “Employer’s Quarterly Federal Tax Return,” to report Medicare, Social Security and income taxes withheld in the fourth quarter of 2016. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 10 to file the return. Employers that have an estimated annual employment tax liability of $1,000 or less may be eligible to file Form 944,“Employer’s Annual Federal Tax Return.”
• File Form 940, “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” for 2016. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it’s more than $500, you must deposit it. However, if you deposited the tax for the year in full and on time, you have until February 10 to file the return.
• File Form 945, “Annual Return of Withheld Federal Income Tax,” for 2016 to report income tax withheld on all nonpayroll items, including backup withholding and withholding on accounts such as pensions, annuities and IRAs. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.
File 2016 Forms 1099-MISC with the IRS and provide copies to recipients. (Note that Forms 1099-MISC reporting nonemployee compensation in Box 7 must be filed by January 31, beginning with 2016 forms filed in 2017.)
If a calendar-year partnership or S corporation, file or extend your 2016 tax return. If the return isn’t extended, this is also the last day to make 2016 contributions to pension and profit-sharing plans.
December 31 is the last day you can benefit from certain retirement tax breaks. For example, if you haven’t put the maximum amount allowed in your 401(k) – $18,000 in 2016 – increasing your contributions can save you money. If you’re over age 50, you can make a catch-up contribution to a 401(k) of an additional $6,000. If you’re age 70½ or older, remember to take required minimum distributions from retirement plans to avoid a penalty. For more tips on managing your retirement plans, contact us.
Are you confused about your choices for paying medical expenses under your employer’s benefit plan? Here are differences between two types of commonly offered accounts: a health savings account (HSA) and a health care flexible spending account (FSA).
Overview. An FSA is generally established under an employer’s benefit plan. You can set aside a portion of your salary on a pretax basis to pay out-of-pocket medical expenses. An HSA is a combination of a high-deductible health plan and a savings account in which you save pretax dollars to pay medical expenses not covered by the insurance.
Contributions. For 2016, you can contribute up to a maximum of $2,550 to an FSA. Typically, you have to use the funds by the end of the year. Why? Unused amounts are forfeited under what’s commonly called the “use it or lose it” rule. However, your employer can adopt one of two exceptions to the rule.
If you are single, the 2016 HSA contribution limit is $3,350 ($6,750 for a family). You can add a catch-up contribution of $1,000 if you are over age 55. You do not have to spend all the money you contribute to your HSA each year. You can leave the funds in the account and let the earnings grow.
Earnings. FSAs do not earn interest. Your employer holds your money until you request reimbursement for qualified expenses. HSAs are savings accounts, and the money in the account can be invested. Earnings held in the account are not included in your income.
Withdrawals. Distributions from both accounts are tax- and penalty-free as long as you use the funds for qualified medical expenses.
Portability. Normally, your FSA stays with your employer when you change jobs. Your HSA belongs to you, and you can take the account funds with you from job to job. That’s true even if your employer makes contributions to your HSA for you.
Because you generally can’t contribute to both accounts in the same year, understanding the differences can help you make a decision that best fits your circumstances. Contact us for help as you consider your benefit choices.
This year’s stock market volatility can be unnerving, but if you have a traditional IRA, this volatility may provide a valuable opportunity: It can allow you to convert your traditional IRA to a Roth IRA at a lower tax cost.
Contributions to a traditional IRA may be deductible, depending on your modified adjusted gross income (MAGI) and whether you participate in a qualified retirement plan, such as a 401(k). Funds in the account can grow tax-deferred.
On the downside, you generally must pay income tax on withdrawals, and, with only a few exceptions, you’ll face a penalty if you withdraw funds before age 59½ — and an even larger penalty if you don’t take your required minimum distributions (RMDs) after age 70½.
Roth IRA contributions, on the other hand, are never deductible. But withdrawals — including earnings — are tax-free as long as you’re age 59½ or older and the account has been open at least five years. In addition, you’re allowed to withdraw contributions at any time tax- and penalty-free.
There are also estate planning advantages to a Roth IRA. No RMD rules apply, so you can leave funds growing tax-free for as long as you wish. Then distributions to whoever inherits your Roth IRA will be income-tax-free as well.
The ability to contribute to a Roth IRA, however, is subject to limits based on your MAGI. Fortunately, anyone is eligible to convert a traditional IRA to a Roth. The catch? You’ll have to pay income tax on the amount you convert.
This is where the “benefit” of stock market volatility comes in. If your traditional IRA has lost value, converting to a Roth now rather than later will minimize your tax hit. Plus, you’ll avoid tax on future appreciation when the market stabilizes.
Of course, there are more ins and outs of IRAs that need to be considered before executing a Roth IRA conversion. If your interest is piqued, discuss with us whether a conversion is right for you.