Tax season is here and it’s important that you and your business are prepared well before the deadlines. We wrangled the Accounting Troops and asked that they provide us with some useful tax filing tips to ensure you get the best return possible.
- Always itemize your deductions if you exceed the standard deduction threshold.
- Review the tax documents you gave to your tax preparer last year to ensure nothing is missing from your current year documents.
- Inform your tax preparer of major changes from last year that may affect your tax return. Changes include moving, new dependent, marriage/divorce, new job etc.
Refund/Balance Due Advice:
- Always remember to e-file and setup direct deposit for a quicker refund.
- File early for a quicker refund.
- Use Direct Withdrawal if you owe taxes. You can file your return at any time and the funds will not be withdrawn until April 15th.
- Always file on time regardless of your ability to pay tax liabilities. This will avoid the automatic failure-to-file penalty.
- Be sure to determine your estimated taxes that are due for the current year in order to avoid estimated tax penalties.
- Contribute the maximum amount on your 401k to reduce your tax liability.
- Make contributions to a regular or Roth IRA by April 15th. The upper limit to put in is $5,000 ($6,000 if you are 50 or older), and you must have earned income at least equal to the contribution. Regular IRA contributions are usually tax-deductible, but withdrawals are taxable. Roth account contributions aren’t deductible, while withdrawals are usually tax-free. Income and other limits apply for both. Taxpayers stymied by the limits can do a “backdoor” Roth IRA: put up to $5,000 ($6,000, 50 or older) in a “nondeductible” regular IRA, and then convert it to a Roth account soon after. Income taxes are due on the conversion, but they will be minimal because the account won’t have earned much.
- Filing an extension also provides self-employed taxpayers an extra six-months (until October 15th) to fund a SEP-IRA or SIMPLE IRA.
- Medical deductions need to exceed 7.5% of your adjusted gross income to be deductible on Schedule A (if you qualify).
- Contribute to health savings accounts. You may deduct up to $6,250 per family ($3,100 single) for a health savings account if you had an approved “high-deductible” health plan linked to the health-savings account. The contributions may be made until April 15th.
- Remember to deduct your personal real estate taxes and mortgage interest on Schedule A.
- If you refinanced your mortgage, be sure to properly deduct the points paid if any.
- Points paid when you refinance may be able to be amortized and deducted over the life of the loan.
- Employees who donate to charities via payroll deduction often forget to include the donations on their personal tax returns. The number isn’t on the W-2 form, and often there is no letter from the charity.
- Donors may not deduct their labor or time, but they may deduct mileage or uniforms. For 2012 the allowance is 14 cents a mile. Board members or certain others may also deduct unreimbursed expenses for attending a conference.
- Feb 28th: File information returns, including Forms 1098, 1099, W-2G and form W-3 with Copy A for payments made during 2012.
- March 15th: S Corporation tax returns and tax payments are due.
- Remember April 15th is when Individual and Partnership tax returns and tax payments are due. Only tax returns can receive a six-month extension, not tax payments.