Unfortunately, it’s that time of the year when many of us turn into one, big mass of sniveling idiots, frantically culling through hundreds, if not thousands, of receipts in preparation for that dreaded date — April 15th.
By this time, everyone should have received all the forms documenting 2013’s income, including W2s and 1099s from employees and clients, as well as 1099-INT forms from banks documenting any interest earned, from $10 on up. And if you received unemployment checks last year, which many folks did, keep an eye peeled for a 1099G from the Feds. Once you’ve got all this paperwork in hand, it’s time for you to start the legwork, even if you hire an accountant to finish up. Thanks to my resources, including allyou.com, who stress the following:
You’ll often come out ahead financially if you itemize: deducting expenses that add up to more than the standard deductions ($6,100 for singles, $8,950 head of household, married filing separately $6,100, and $12,200 for married filing jointly and qualifying widow/widower). Typical deductions include mortgage interest, charitable donations, reimbursed work expenses, real estate taxes, medical co-pays, and health care premiums, among others. (Check online at irs.gov to see a complete list of potentially deductible expenses.) And speaking of, large amounts wave a big, red flag in Uncle Sam’s face so make sure you’ve got receipts for all charitable donations. Otherwise, don’t even bother with them…
If you’re among the hordes of Americans who did NOT bring home the bacon last year, don’t forget to include out-of-work expenses among your deductions, as long as you’re looking for a job in your current field. For example, deductions are allowable for: 1) fees for job-search websites, employment agencies, professional organizations and resume preparation; 2) travel costs associated with out-of-area interviews; 3) a medical exam required by a potential employer; 4) clothing and uniforms used for your job but not for everyday use; and 5) educational expenses to include tools and supplies, license fees, and journals/trade magazines.
File an extension with dear ‘ole Uncle for the six extra months you’ve got coming if you need the time to finish up. Just remember the extension doesn’t apply to the tax money you owe. Estimate the amount you think you owe and send that amount to Uncle Sam, along with the required Form 4868. If the payment isn’t enough, however (at least 90 percent of the balance by April 15th), you’ll have to come up with cash to pay penalties and interest, which continues to accrue until the debt is paid off. Check irs.gov to set up a payment plan IF you owe less than $25,000. On the other hand, if you’re in more than deep-you-know-what, it’s imperative to speak with an agent in person to work out an arrangement that’s agreeable for both you and the IRS.
If all else fails, call in the big guns. If the returns are complicated (i.e. you’re self-employed, own a rental property, or other out of the norms), be careful not to pay more than is necessary. Whether Emma Expert is an H&R Block preparer to whom you pay less than $100 to a CPA or tax attorney to whom you might pay many times that amount, the more complicated your returns are (for whatever the reason), the more likely you’ll need a preparer with more expertise than you possess. And, generally, you can deduct the fee paid on the next year’s return, assuming you itemize.
(Starting next week and continuing through April 9th, I’ll conclude each column with my annual “Tax Tip.” In the meantime, if you haven’t already begun to gather and assemble, get going!)
Ellen Phillips is a retired English teacher who has written two consumer-oriented books. Her Consumer Watch column appears every Saturday. Email her at consumer email@example.com.
Ellen Phillips is a retired English teacher who has written two consumer-oriented books. Her Consumer Watch column appears on Saturdays in the Business section of the paper. An expanded version is at www.timesfreepress.com under Local Business.