“I just LOVE tax season,” said no one ever! We know…so we’re here to help make it a little easier on you this year. Kurt Filipovitch and the experts from Filipovitch and Co., a local accounting company that has done business in the city for over 35 years, share their tips to make tax season easier on everyone.
Stop procrastinating. Schedule an appointment even if you don’t have all your paperwork together. All information reported by third parties such as W-2s, 1099 INT/DIV, 1099 MISC will come in the mail by late January. And if you are expecting a refund, why wait?
The days of delivering a ‘shoebox’ full of receipts to your accountant are long gone. The primary reason is that there are so many more efficient alternatives. If you still prefer hard copy record keeping, try using color-coded folders to stay organized. Want to go electronic? Check out simple computer programs like Microsoft Excel or Intuit QuickBooks. Prefer mobile apps? FreshBooks or Mile IQ can help keep records. No matter which method you choose, be detailed! Keep copies of invoices/receipts, but also make notes on them regarding the purpose of the expense and any particulars that may help prove the deduction.
Bring copies of living wills, power of attorney, healthcare proxies, Social Security card, list of investment, retirement and bank accounts when visiting your accountant. Store these documents in a portable fireproof box in case of emergency and consider keeping a copy off-site, with your attorney or accountant.
- Home Office Deduction – A business deduction is available to taxpayers who use an area of their home exclusively, and on a regular basis, either as their principal place of business or to meet with patients or customers. A qualifying taxpayer can choose to deduct a prorated portion of the actual total cost of maintaining their home. Alternatively, a simplified method is available based on a flat $5 per square foot of home used for business (maximum 300 square feet).
- Compensate Children for Working – A business owner with children that provide services to their business can consider paying them a reasonable wage. This can teach children the value of work ethic, and will usually reduce the overall family tax burden by taking advantage of the children’s lower tax rates.
- Automobile Mileage – Most taxpayers think of writing off automobile expenses for their business. The IRS also allows a mileage deduction for certain personal trips. Eligible taxpayers can deduct 19 cents per mile for medical or moving, and 14 cents per mile for charitable purposes. Be sure to keep a mileage log to substantiate the deduction!
- Tax Preparation Fees – Accounting and tax preparation fees are generally deductible on Schedule A, but only if the taxpayer itemizes their deductions, and only to the extent they exceed 2 percent of the taxpayers income. Alternatively, consider allocating a reasonable amount of the deduction to other schedules that might not be limited – Schedule E for rental activities, Schedule C for business, Schedule F for farming activities.
For all you procrastinators – rejoice, because you actually have until April 18th this year to file taxes. The regular deadline of April 15th falls on a Saturday, and Washington DC will observe Emancipation Day on Monday the 17th. Then again, why wait! Meet with your accountant now so you don’t have to stress with any last minute issues, plus your tax return deserves your time and attention. If you don’t want to give the government your money before the official deadline, don’t worry. You can finish your return now and schedule it to head out electronically on the 18th. But if there is absolutely no way you’ll file taxes before the April deadline, take advantage of an extension. It merely extends the time for filing and is not an extension of time for paying any balance due that is reported on the return when filed. The balance due will be subject to penalties (1/2 percent/month) and interest (4 percent/year) from April 15th until the time of payment of the tax. FlipCPA.com