With the IRS deadline to file taxes just past, you may be tempted to relax, pull a Scarlett O’Hara and think about next year’s taxes tomorrow. While that attitude is perfectly understandable, it will cause you to miss an excellent opportunity to make your 2018 tax season much less stressful and more efficient. First, review the tax form you just filed. Should you be making adjustments? Are you paying too much in taxes? Should you be adjusting your withholdings? Should you be paying estimates? If so, are you calculating your estimates correctly? Are you maximizing your deductible IRA contributions? If you are unsure about any of these answers, contact us. We’d be happy to answer any questions you have. Now is also a good time to set up an organizational system for next year’s taxes. Create a file in which you can collect receipts and other tax documents. Label your receipts manually, or categorize them electronically in real time so you don’t have to go back months later and try to figure out which expenses qualify for tax deductions or exemptions. Keep track of any changes in your life that might affect your withholdings and/or credits including marital status, children, home ownership, educational expenses, etc. If you ended up with a particularly jarring tax bill, you can request and submit an Installment Agreement Request Form that will allow you to stretch out your payments. After you do so, sit down with a professional to figure out what adjustments you can make to prevent a large bill in the future. Lastly, be sure to track changes in the tax laws as they will affect not only your return next year, but also some of the financial decisions you make throughout the year. We’ll be writing more posts that note some of the upcoming changes and how they will affect you, so be sure to check back in the coming weeks. With… | Read More »
tax tips
Three ways you can lose money by filing your taxes
With the April 17 deadline fast approaching, many people are scrambling right now to file their taxes on time. While there is both plenty of time to file a traditional return and the option to file an extension, it is critical to proceed with caution. Any missteps probably will wind up costing you money. Here are three ways you can actually lose money by filing your taxes. You file an extension but fail to pay the taxes you owe. All tax payers have the right to a six-month extension to file their taxes, they just need to submit Form 4868. They can also file an extension request online. But you still have to pay the taxes you owe on time. The extension only applies to the paperwork, not the payment. If you fail to pay by midnight on April 17, you’ll face a penalty and you’ll also have to pay interest on the rest of the money you owe. You make a mistake on your return. Typos can cost you a lot of money. The three most common errors are math mistakes (less likely with available tax software but still a concern), an incorrect Social Security number, and the failure to sign or date the tax return. At best these mistakes will delay your refund, at worst they’ll result in penalties. Do not file in haste. If you’re running out of time, file an extension, pay if you owe, and either complete your return carefully yourself or, even better, hire a tax preparer to complete it for you. You don’t claim your refund in time. You have three years to claim a refund. If you file your tax return more than three years after it is due, you forfeit your right to your refund in most cases. In this case, procrastination could cost you a significant amount of money. The IRS offers many helpful tips on its website. If you… | Read More »
Summer is a great time for cleaning out tax documents
As you ‘re doing your annual summer cleaning, you may be asking yourself, “Do I need to keep these tax returns dating back to the 1980’s? The short answer to that question is no. So how long do you need to keep old tax documents? That answer to that question is a little bit more complicated. As always, the IRS has some good information on their website – www.irs.gov According to the IRS: “The length of time you should keep a document depends on the action, expense, or event the document records. Generally, you must keep your records that support an item of income or deductions on a tax return until the period of limitations for that return runs out.” So what exactly does that mean? The IRS recommends that you keep your tax returns and any supporting documents for 3 years after the date of filing. So if you filed your 2013 tax return on April 15th, 2014, you would keep all of your records until April 15th, 2017. As with any IRS rule, there are exceptions: 1. If you have under reported your income by 25% the IRS can go back 6 years. If you claim a deduction for worthless securities or a bad debt, keep your records for 7 years. If you are self-employed, it is recommended that you keep your records for 6 years. If you have documents connected to assets such as rental property, stocks, bonds, or business assets etc., keep those records until 3 years after you dispose of the asset. Documents for distributions from an IRA should be kept for 7 years. If you do not file a return or file a fraudulent return, keep your records forever because the IRS can go back indefinitely. If you still just can’t get yourself to throw out all of those old documents from 1985, there are other options. In the world of high technology that… | Read More »