WHAT MEMBERS OF THE MILITARY SHOULD KNOW ABOUT THE EARNED INCOME TAX CREDIT

The earned income tax credit (EITC) benefits certain people who work and have earned income that’s less than $53,930. A member of the armed forces can elect to have their nontaxable combat pay included in earned income for purposes of the EITC. Doing so may increase or decrease their EITC. The IRS encourages these taxpayers to calculate their taxes both ways to find out what's best for them.

Taxpayers who elect to include their combat pay in income must include all nontaxable combat pay they received. They can't choose to include only a part of the nontaxable combat pay in earned income.

Couples with two members of the military filing a joint return have a few options when deciding whether to include combat pay in their income: ● Spouse 1 can choose to include all their nontaxable combat pay and spouse 2 can choose zero. ● Spouse 1 can choose to include zero and spouse 2 can choose to include all of it. ● They can both choose to include all their nontaxable combat pay. ● They can both choose not to include their nontaxable combat pay.

The taxpayer can find the amount of their nontaxable combat pay on their Form W-2, in box 12, with code Q.

WHICH TAXES CAN A BUSINESS DEDUCT AS A BUSINESS EXPENSE?

There are many different kinds of taxes. Some are personal taxes, while others are business taxes.

Examples of deductible business taxes include:

● Payroll taxes: the employer's portion of FICA (Social Security and Medicare tax) as well as federal & state unemployment tax. ● State business income taxes and franchise tax. ● Property taxes on property owned by the business. ● Taxes on business purchases (e.g. sales tax paid on purchased items, airline tax and hotel tax for business travel, etc. Note these taxes are not separated out. They are considered a part of the cost of the item purchased.)

Personal taxes, such as your personal income taxes and property taxes on your personal residence, are not business deductions. These should therefore be paid from your personal bank account. If you pay personal taxes from your business bank account, they must be recorded as distributions and not as expenses.

Sales tax collected from customers should not be recorded as an expenses when remitted to the state, nor should it be recorded as income when collected from customers. Instead, it should be recorded as a liability in a sales tax payable account.

THESE TAX CREDITS CAN MEAN A REFUND

Taxpayers who are not required to file a tax return may want to do so. They might be eligible for a tax refund and don’t even know it. Some taxpayers might qualify for a tax credit that can result in money in their pockets. Taxpayers need to file a 2017 tax return to claim these credits. Here is information about four tax credits that can mean a refund for eligible taxpayers:

● Earned Income Tax Credit: A taxpayer who worked and earned less than $53,930 last year could receive the EITC as a tax refund. They must qualify for the credit, and may do so with or without a qualifying child. They may be eligible for up to $6,318. Taxpayers can use the 2017 EITC Assistant tool to find out if they qualify.

● Premium Tax Credit: Taxpayers who chose to have advance payments of the premium tax credit sent directly to their insurer during 2017 must file a federal tax return to reconcile any advance payments with the allowable premium tax credit. In addition, taxpayers who enrolled in health insurance through the Health Insurance Marketplace in 2017 and did not receive the benefit of advance credit payments may be eligible to claim the premium tax credit when they file. They can use the Interactive Tax Assistant to see if they qualify for this credit.

● Additional Child Tax Credit: If a taxpayer has at least one child that qualifies for the Child Tax Credit, they might be eligible for this tax credit. This credit is for certain individuals who get less than the full amount of the child tax credit.

● American Opportunity Tax Credit: To claim this credit, the taxpayer, their spouse or their dependent must have been a student who was enrolled at least half time for one academic period. The credit is available for four years of post-secondary education. It can be worth up to $2,500 per eligible student. Even if the taxpayer doesn’t owe any taxes, they may still qualify. They are required to have Form 1098-T, Tuition Statement, to be eligible for an education benefit. Students receive this form from the school they attended. There are exceptions for some students. Taxpayers should complete Form 8863, Education Credits, and file it with their tax return.