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 »
taxes
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 »
Senate offers good, not great, news about your taxes
While they did not make them permanent, members of the Senate did vote last night to extend several tax breaks, which is good but not great news for charities and the tax payers who support them. The temporary extensions will expire after Dec. 31, 2014, unless Congress votes further extensions in the next session. Effective immediately, though, donors who want to make an IRA charitable rollover for the 2014 tax year can do so. The charitable IRA rollover was designed to encourage older American tax payers to donate from their Individual Retirement Accounts. IRA owners age 70 ½ or older can exclude up to $100,000 a year from income if the IRA funds are paid directly to qualified charities. The amount also is considered as the required minimum distribution, or part of it depending on your individual circumstances. Without this exemption, IRA owners would have to withdraw the funds, pay taxes on them, and then contribute to the charity before claiming the deduction. This offered less incentive for these types of charitable contributions, especially for tax payers who normally don’t itemize their deductions. While the temporary extension is a hassle for tax planning, which normally is most effective when effected two years out, it does allow for some immediate deductions including: 1) Teaching expenses, up to $250, for those who purchase their own supplies. 2) Tuition fees and deductions 3) State and local sales tax as an option for itemized deductions if the amount is greater than the state income taxes paid. 4) Mortgage insurance premiums as an itemized deduction. Additionally, attached to the extender bill is the Achieving a Better Life Experience (ABLE) Act, which allows people who were disabled before the age of 26 and their family and friends to contribute up to a combined total of $14,000 a year to an ABLE account. Earnings would grow tax free and the money would not disqualify the disabled person… | Read More »