Friday, November 27, 2015

Steps to Take Now to Make Filing Your Income Taxes Easier

FROM usnews.com
In mid-April, shortly after the income tax filing deadline for millions of Americans, we encouraged readers to begin planning for their 2015 return. Here’s another timely reminder, and this one is especially worth heeding: Steps you take between now and the end of the year can dramatically reduce your income tax burden in April and beyond.
If you’ve been planning all along, you’re in good shape. But if you need an extra jolt, now’s the time to set up an organization system (put it on your holiday wish list!), review your withholdings or research charities for end-of-year donations. Planning now can help you avoid costly mistakes.
First and foremost, Cari Weston, senior technical manager on the American Institute of CPAs tax staff, recommends dusting off last year’s paperwork.
“Pull out last year’s return and see which items were used for preparing the return, because that’s going to be your starting point for this year’s return,” she says. “Create a list of all the things you’ll need, and keep track of them as they all come in.”
If you’re not incredibly tech-savvy and you haven’t been using apps all year to track your spending and saving, there’s still the traditional approach: clean out a drawer, empty a basket or start a folder – almost anything will do as long as you keep all your records in one place.
While mortgage statements and W-2s can wait a bit longer, if you’ve been keeping all your receipts in a drawer, now’s the time to start sorting them. Weston recommends taking advantage of winter holidays to do a little bit at a time. “If you have itemized information, go through what you can now, on the holiday break, and sort them out by category,” she says. “Get them organized and total them as much as you can, so you can go to your [certified public accountant] with totals and still have supporting information if you need it.”
Kelley C. Long, a CPA, personal financial specialist, certified financial planner and a member of the National CPA Financial Literacy Commission, encourages her clients to run an income tax projection before the end of the year. “Your CPA is going to be the easiest way to go about running the project. If you’re not working with one, go to TurboTax or the IRS website [and] fill out a tax form for yourself. That can help you get organized,” she says.
Long adds that by playing with the figures, taxpayers can get a sense of how and where they need toscale up or back on their deductions.
“Start asking yourself questions: What happened this year that’s new that I didn’t have last year?” Weston says. “Did you have or adopt a child this year? Did you send a kid off to college? Do you go yourself?” A new job, a refinanced mortgage or a student loan that’s finally paid off represent a change to your income tax return. 
Long also suggests offsetting capital gains by selling some stocks at a loss if your portfolio increased in value this year, and consider making an extra mortgage payment or pay next semester’s college tuition before Jan. 1 to help save on taxes.
While April 15 might seem far in the future, you really only have a few weeks left for certain tasks. If you’ve waited to buy your accountant a cup of coffee to discuss your finances, act soon, or that coffee may now have to be ordered to go. 
“If you’re someone who has a more complicated return, hopefully you’re hearing from your CPA, and they’re telling you to go see them now,” Weston says. “If not, you should call them.” While a late-year chat with a tax advisor can be a smart move for any taxpayer, it’s especially important for the self-employed, those with rental properties or anyone falling outside the parameters of a standard W-2 return.  
If you don’t have a CPA or tax preparer, or you aren’t especially keen on the one you have, now’s also a good time to begin looking for one. Don’t just check online; ask friends or family members who might be a good fit. If your records and filings are all digital, having an accountant who only works via snail mail and telephone will be an incredibly frustrating experience. If you’re nearing retirement, having an accountant who focuses on the millennial set might not be the best fit.
Not hiring a CPA anytime soon? Now is also a great time to try out different online tax-prep software to see which one is right for you.