Tax Season Tips
Get a Jump on Tax Season!
We understand that tax season can be a stressful time of year as individuals and business owners scramble to file their tax returns accurately and on time. Fortunately, if you’re ready and aware of what to anticipate during government shutdowns and new tax law implementations, you can feel confident knowing that your filings will be handled as smoothly as ever.
Question: How will the partial government shutdown affect your tax return?
In a press release by the IRS, the Internal Revenue Service will still accept federal tax returns beginning January 28, 2019, and they will be allowed to pay out refunds which should hit the account of early filers as early as February.
Regardless of what’s happening in the political world, there are still a few practices during tax time that will benefit you no matter what.
Here are a few of tips to get ahead of the curve this tax season:
1. Choose a Preparer & Schedule an Appointment
If you don’t have a tax preparer yet, now’s the time to find one. To find a preparer, ask friends and advisers to make a referral, or contact us; we can help get you connected. Be sure that the person you choose has a Preparer Tax Identification Number (PTIN). Only those authorized to prepare federal income tax returns will have one. Also ask about fees, which will likely depend on the complexity of your return; steer clear of anyone taking a percentage of your refund. The IRS directory of preparers will help you search by qualification and location.
The sooner you meet with your preparer, the sooner you can begin the process and make the April 15th deadline. If you don’t get started early, you may miss out on actions that can lower your 2018 tax bill. Act quickly if you think you’ll get a refund so you can receive your refund payment earlier.
2. Gather Your Information
By the end of January, you should receive most, if not all of the information you need to complete your tax return. For each form you receive, verify that the information matches your own records.
Here are some of the most common forms: (Note: This is not a complete list; the IRS has information on the many other types of forms you may need.)
- W-2 – Filled out by your employer to document your earnings for the calendar year.
- 1098 – Reports mortgage interest (1098), student loan interest (1098-E), and tuition payments (1098-T).
- 1099 – There are several of these forms; they report all income that isn’t salary, wages, or tips.
- 1095-A – Reports information from the government marketplace from which you purchased health coverage.
- W-2Gs – For certain gambling winnings.
3. Get Your Receipts Together
Which receipts you need depends on whether you choose to itemize your personal deductions instead of claiming the standard deduction. Most people will only choose to itemize their deductions if it gives them a better return. The only way to know for sure is to determine the amount of your itemized deductions and compare them with your standard deduction.
If you are itemizing this year, gather any receipts that will qualify for a deduction. Make sure to look for receipts for medical costs not covered by insurance or reimbursed by any other health plan, property taxes, and job-related and investment-related expenses.
If you have business income and expenses to report, you’ll need to share your books and records with your tax preparer. The more organized you are, the less time it will take your preparer, which translates into lower fees and more money in your pocket.
4. Gather Records for Charitable Contributions
If you made donations to charity and want to itemize your deductions, you will need specific records to claim any write-offs. For example, for contributions of $250 or more, you need written acknowledgment from the charity stating the amount of your gift and that you did not receive anything in return. If you’re lacking acknowledgment, contact the charity and ask for it. You need it in hand by the time you file your return. Find details about the type of records needed for charitable deductions here.
5. Prepare for Tax Law Changes
You don’t have to become a tax expert all-of-a-sudden, but knowing about new tax rules will help you prevent being caught off-guard while doing your own taxes. The individual healthcare mandate brought in a slew of changes: new forms for claiming the premium tax credit for eligible individuals who purchased coverage through a government marketplace (exchange). There are also new forms for figuring the shared responsibility payment for those who failed to carry coverage and do not qualify for an exemption. Find more information about the individual mandate and exemptions from the mandate on the IRS website. Starting with the 2019 tax year, there will be no penalty for failing to have health insurance.
Other changes will start with this tax year and last through 2025. These include the end of the home-equity loan interest tax deduction. Also deductions for job-related expenses, tax-prep expenses, and a number of other outlays; a drop in the home-mortgage interest deduction on new mortgages to interest on $750,000 from $1 million, and the end of the personal exemption.
In addition, the state and local tax deduction (which includes state income, property, and other taxes) maxes out at $10,000; previously there was no ceiling on this deduction. On the other hand, the child tax credit doubles and so does the standard deduction (pretty much).
Another interesting change starting this year is the law changing the way spousal support, or alimony, payments are taxed and deducted. If you would like to learn more about that, click here.
6. Decide What to Do With Your Refund
Your tax refund could be the answer to owning your first home, moving up to a larger house/property, or making the leap to a new adventure. We offer a broad portfolio of mortgage products to choose from including conventional loans, FHA, VA, and USDA loans. Let us help you put that tax refund to good use!
Here are ways you can use your tax refund toward a home purchase:
- Closing costs
- Down payment
- Moving costs
- Future tax benefits
Start doing prep work early for your taxes soon so you’ll have a successful tax return experience. Whether you’re doing your own return, or having a preparer do it, make sure you have thorough documentation and organized records. That way you can reduce the amount of time and money you spend on this once-a-year, super fun activity.
Please don’t hesitate to contact us or fill out the form below with your mortgage related questions. Contact your CPA with questions about if/how the Tax Cuts and Jobs Act has affected your personal tax return and finances. And if you need a referral to a reputable CPA, please let us know!