Women on Money & Mindset: 6 tips to get you ready for 2017 tax season
Most Americans dread tax season because they find the data gathering overwhelming. I fall into that category as I haven’t even started and the deadline is now six weeks away. Why can’t they take what they need, the government, state and federal, and just be done with it? Why do I now have to pay someone to figure if I owe or get a refund? Tell me what the number is at the beginning of the year, I’ll put it in an IRS escrow account and write a check between Christmas and New Year’s Day and send it your way. No, that would be too easy!
If you’re like me, you should read this. Here are some tips on how to get more organized to make tax season easier for you. A note of caution to readers: The tips below should only be used for a 2017 tax return. The Tax Cuts and Jobs Act of 2017 eliminated many of the deductions listed and will affect other parts of your tax return — next year. Major props to Marcia Campbell for sharing a part of her 25+ years of expertise.
Review 2017 and look for changes that happened such as:
- Marriage or divorce
- New baby or an adopted child
- Death of someone who lived with you
- Sale of a house
- New business
- Move for a job
All of these life changes can affect your taxes. Write them all down so that you don’t forget them when your return is prepared.
Go back in time
This is the most over-whelming step for a lot of us. Set up a folder to gather all of your tax information. As you receive W-2s, 1099s, 1099-Rs, and brokerage statements through the mail or the Internet, put that documentation in the folder. Everything will be in one spot to make things easier for you.
Make sure you have the documentation and are ready to report all other income such as:
- Income from a sole proprietorship
- Cancellation of debt income
- Sale of investment or personal real estate
- K-1 income from partnerships, trusts or S corporations
- Adjustments to reduce income like pension contributions, IRAs, student loan interest, tuition and HSA contributions should be considered.
Capture every deduction
Deductions help reduce your taxable income, which generally means a lower tax bill. Depending on your personal situation, deductions could include:
- Medical and dental expenses
- Travel costs for medical treatment
- State and local taxes
- Property taxes
- Mortgage interest
- Charitable donations in cash and non-cash
- Gambling losses if you had gambling winnings
- Job hunting expenses
- Moving expenses for a new job
Credits are more valuable than deductions because they reduce taxes you might owe dollar-for-dollar. The most common credits include:
- Education-related credits
- Adoption expense credit
- Earned income credit
- Elderly or disabled credit
- Energy credits
If you bought Affordable Care Act coverage through the government’s marketplace, watch for form 1095-A. It will help in the calculation of the Premium Tax Credit or reconcile the amount that you received in advance.
Most people have federal and state taxes withheld from their W-2s, 1099s and Social Security. Don’t forget any estimated payments that you might have made during the year or any overpayments from 2016 that were rolled over into 2017.
If you sold any real estate, review the final escrow statement for any California withholding that might have been sent to the Franchise Tax Board.
After gathering all of the above information into your folder, you are finally ready to prepare your own returns or take the folder to your tax preparer.
This tax list covers issues common to most filers but taxes are different for each of us. Adapt the list above to your situation. If you have questions about any of the items that apply to you such as sole proprietorship or K-1s, consider seeking advice from a CPA.
If you had a CPA prepare your tax returns in the past, they probably have sent you a tax organizer to help you organize your paperwork in a similar way to the list presented here. As a matter of fact, they have sent it. I now have to find it, set an appointment and get cranking on pulling it all together by that day. Thank you so much for these tips!
Marcia L. Campbell has worked as a CPA for over 25 years specializing in seniors, trusts, estates, court accountings and probate litigation support.