Even with the government shutdown, it is almost “Tax Time”.
The Internal Revenue Service (IRS) has announced that tax season will open on Monday, January 28, 2019. The IRS will begin accepting paper and electronic tax returns that day.
Due Date for Individual Returns this year is April 15, 2019.
But even if you can’t know for sure exactly when you’ll be able to file your return, it’s not too early to get ready for tax season.
Five Key actions to consider as you get ready to file your taxes for the 2018 tax year.
Watch your withholding
Tax reform caused the amount of money withheld from paychecks to go down in 2018 for many taxpayers. That made their paychecks bigger, but it could result in smaller refund checks for many, and some might even end up owing tax when they file their returns.
The IRS has come up with a tool to assess whether your withholding is correct. If it’s not, you can make adjustments to your payroll withholding by filing a new Form W-4 with your employer. Or looking at estimated tax payments can prevent you from owing penalties and interest.
Gather Your Information Returns
By the end of January, you should have received various types of information returns that you need. For each form, verify that the information matches your own records.
Below are some of the most common forms (Note: This is not a complete list; the IRS has information on the many other types of information returns you may need):
Form W-2, if you have a job
Form SSA-1099, if you received Social Security benefits
Various 1099s to report income such as dividends(1099-D), interest (1099-INT), and nonemployee compensation paid to independent contractors (1099-MISC) (Note: Security Firms don’t have to mail Form 1099-B, which reports gains and losses on securities transactions, until January 31, 2019.)
Form 1095-A to report information from the government Marketplace from which you purchased health coverage
Various 1098s reporting mortgage interest (1098), student loan interest (1098-E) and tuition payments (1098-T)
Schedule K-1s from entities in which you have an ownership interest, such as S corporations, partnerships, limited liability companies, trusts or estates (Note: You may not have received them yet; they are due by the first March 15 following the end of the partnership’s tax year; check with the entity if one doesn’t arrive.)
Get Your Receipts Together
Which ones you need depends on whether you choose to itemize your personal deductions instead of claiming the standard deduction. You can choose to itemize if this produces the greater write-off. Unfortunately, the only way to know for sure is to determine the amount of your itemized deductions and compare them with your standard deduction amount. (Note that this deduction will double for the 2018 tax year, but not for the year that just ended.)
For itemizing, get receipts together now by whatever system (or lack of system) used throughout the year to retain receipts for various deductible expenses. Look for receipts for medical costs not covered by insurance (deduction threshold is 7.5% for the 2018 tax year under the new tax law – it will return to 10%, starting with the 2019 year) or reimbursed by any other health plan (e.g., a flexible spending account or health savings account), property taxes, and job-related and investment-related expenses).
If you have business income and expenses to report on Schedule C, you’ll need to share your books and records (e.g., QuickBooks or other accounting system, receipts for expenses, bank and credit card statements). The more organized you can be, the less time it will take your preparer, which translates into lower fees for his or her service.
Be ready for tax season
Preparing your tax return might seem daunting this year, especially with all the changes that have occurred lately. But with the prospect of possible tax savings, you have a big incentive, and getting ready now will help you get off to a running start when tax season officially opens.
Gather Records for Charitable Contributions
If you made donations to charity and itemize your deductions, you need specific records to claim any write-off. For example, for contributions of $250 or more, you need a written acknowledgment from the charity stating the amount of your gift and that you did not receive anything (other than perhaps a token item) in return. If you’re lacking an acknowledgment, contact the charity and ask for it. You need it in hand by the time you file your return.
Plan for 2019
It is never to soon to begin planning for your 2019 income taxes. As part of completing your 2018 return, you should include a conversation about planning for this year and set a meeting to outline the goals and actions that need to be taken.
If you are a Tannery & Company client, you will be receiving a special “It’s Tax Time 2018” email on Monday about your organizer and using your Smart Vault portal.
Not a client and want to know more?
Click on this link and set up a phone call conversation and we can discuss your needs and our services.
It’s the beginning weekend of The Ft. Worth Fat Stock Show – which means the weather is going to get cold.
Stay warm this weekend,
Michael Tannery CPA, CDFA® AIF®
Registered Principal
Tannery & Company
Tax – Accounting – Wealth Management
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