Steps to Take Before Your Tax Preparation

Preparing for Your Tax Return

We sat down with Steve Barnes of Barnes & Company, CPAs, P.C. He shared his Top Tax Prep Tips for the smoothest possible experience.

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 cancellation of debt (1099-C), dividends(1099-D), interest (1099-INT), and nonemployee compensation paid to independent contractors (1099-MISC) (Note: Brokers 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)
  • Form W-2Gs for certain gambling winnings
  • 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.

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. Find details about the type of records needed for charitable deductions in IRS Publication 1771.

First Year for Most Tax Law Changes

The individual healthcare mandate brought in a slew of changes, including new forms for claiming the premium tax credit for eligible individuals who purchased coverage through a government Marketplace (exchange) and for figuring the shared responsibility payment for those who failed to carry coverage and do not qualify for an exemption.

You can find general information about the individual mandate and about exemptions from the mandate on the IRS website. (For deadlines for enrolling through the Health Insurance Marketplace, go to the government website.) Starting with the 2019 tax year, there will be no penalty for failing to have health insurance.

Other changes that started with the 2018 tax year and will last through 2025: the end of the home-equity loan interest tax deduction and 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) now 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 (pretty much) the standard deduction.

Make a List of Personal Information

You probably know your Social Security number, but do you know the number for each dependent you claim? Jot down this and other information (e.g., addresses of vacation homes and rental property, dates you moved, information about property that you bought and sold, including dates, what you originally paid, what you received on the sale and expenses you had) needed to complete your return.

Decide Whether to Ask for a Filing Extension

If you need more time to complete all of these tasks, you can request a filing extension to October 15, 2019. This will avoid any late-filing penalty, but be sure to pay what you think you’ll owe to minimize or avoid any late-payment penalty. There’s no extension beyond April 15 for paying the tax that is due.

Find a Copy of Last Year’s Return

If you use the same preparer that you used last year, likely the old return is already on hand. If you go to a new preparer, last year’s return serves as a reminder to the preparer – and you – of some items you don’t want to overlook. Below are two examples:

  • Payors of interest and dividends. If you received this income last year, look for 1099s for this year (unless you’ve sold stocks, closed bank accounts or made other investment changes that account for not getting a 1099 this year).
  • Charities. If you made small gifts, you may not have received any acknowledgment from the organization, but you can still deduct your gift as long as you have a canceled check or other proof. See last year’s list of organizations you donated to and see whether you made similar gifts this year.

Questions about Tax Preparation?

BARNES AND COMPANY, CPAs, P.C.

646 Long Island Ave

Deer Park, NY 11729

631.586.2830

2019-01-28T11:32:57+00:00