From the Holiday Season to Tax Season
The joy and stress of the holidays is almost behind us and fast approaching is the not so joyful stress of tax time. Taxes are something many of us dread. However, with a little bit of organization and preparation it’s not so bad.
Start off by pulling out a copy of last years taxes. Browse through your tax folder from last year (hopefully you have one). Make a checklist of forms you expect to receive from employers and financial institutions such as W-2’s, 1099’s, 1098’s etc. When these documents start coming in the mail, check them off your list. Remember if, your missing a document, it’s still your responsibility to make the appropriate income claims on your taxes.
Next make a list of deductions you were able to take last year. Chances are, this year will be fairly similar, but here’s a few things you may want to look for:
- Medical and dental expenses
- Personal property taxes
- State or local taxes
- Personal losses due to theft or casualty
- Job related expenses such as travel or education not covered by your employer.
- Charitable donations (cash or non cash)
- Investment expenses
- Tax preparation fees
If your a home owner, you will probably itemize deductions on a Schedule A. This may get you a few additional deductions such as:
- Real estate property taxes
- Mortgage interest (typically reported on a form 1098)
- Mortgage insurance premiums
- A portion of closing costs if you bought, sold, or refinanced your home this year.
- Also keep track of money you put into your house for remodeling. This could affect your cost basis down the road when you sell.
If you are a rental property owner, you’ll probably file a Schedule E and you will need a total of the following income and expenses:
- Rents received
- Security deposits kept
- Advertising Auto and travel
- Cleaning and maintenance.
- Legal and other professional fees
- Management fees
- Mortgage interest
- Other interest
- Property Taxes Utilities
Rental owners will also likely be eligible for :
Now that you’ve got a list together, go ahead and start digging up and organizing your information for each category. For the average person, this is a relatively simple task. However, for rental property owners or business owners, this can be a huge chore. We recently started using Quicken Rental Property Manager to help track all of our rental and business activities. This tool has been a huge time saver for us. Now we can print income and expense reports showing each of these categories.
If you have been getting large refunds every year, you may want to consider increasing the number of allowances you claim on your W-4. This will reduce the amount withheld from each paycheck giving you a larger paycheck, but a smaller tax return. Getting a large tax return is essentially like giving the government an interest free loan for the year. So why not get the extra money out of each paycheck and use it wisely throughout the year (invest it or pay off your debts).
Please keep in mind we are not tax professionals. This is not intended to be tax advice, but a general overview of getting prepared for tax time. Each individuals tax situation is different. So please consult a tax professional if necessary. Since our taxes have gotten fairly complicated over the past few years. We have implemented the help of a Nick Curran at CK Accounting and Tax. If you have questions or need help with your taxes, we recommend his service.