With the new year comes the annual filing of income tax returns. While not a task most of us look forward to, there are steps you can take to significantly ease this burden whether you are a “do-it-yourself” or seek professional help.
Tax Time Organizing Tips: Create your files to match the flow of your 1040 return.
- Income – W – 2s, 1099s, SS statements, interest income, K-1s investments
- Charitable Donations – 1 file for cash and another non-cash donations, include mileage log
- Medical/Dental – include mileage log
- Other – property taxes, mortgage interest, state income tax documents, casualty/theft losses, unreimbursed business expenses
- Business Related Activities – some hobbies qualify as a business
- Education – tuition, fees, other education related expenses
- Credit Card Statements – highlight deductible expenses
With the incoming new Federal Government administration, it is likely we will see changes to the complex tax code. Several proposals have been discussed including compressing the current seven income tax rate brackets to three or four. Also, corporate income tax rates will likely be lowered. However, these proposals could have unintended consequences and result in higher tax payments for many taxpayers. So we will see how Congress and the new Federal Government tackle this difficult task. We do know some tax breaks have ended as of December 31, 2016, as a result of the Tax Hikes Act of 2015 (PATH Act). This includes:
- Tuition and Fees – a popular deduction up to $4,000 of qualified tuition and fees Mortgage Insurance Premium – 2016 is the last year for this deduction.
- Mortgage Insurance Premium – 2016 is the last year for this deduction
- Cancellation of Debt – a tax break for debt forgiveness
- Business Credit Cards – some small business credit cards expire from 2016 through 208
Too much to think about?
Consider hiring a tax expert such as Certified Public Accountant or CPA. CPAs must complete a rigorous college level curriculum as evidenced by a comprehensive multiple day examination, are licensed by State Board of Accountancy and must pass strict ethical and business practice requirements each year, including at least 40 hours of continuing professional education.