by Tina Perkins//
Are you still stalling on filing your 2016 tax return? Is the stress building? Most people procrastinate unless they are expecting a large refund or have an easy tax return. Three reasons people procrastinate are disorganized records, DIY and unresolved IRS or complicated tax matters.
If you find yourself procrastinating and you just don’t know where or how to start, I offer the following to assist you.
Separate your documents into three broad categories — income, expenses and other.
“Income” is usually supported by a W-2 or 1099 of sorts. A W-2 comes from wages where you were employed by someone else (e.g. Walmart, local diner, etc.). A 1099-Misc reports the income someone else paid to your small business. Unemployment and social security benefits, pensions, retirement income, gambling winnings, interest and dividends are reported on their own 1099 forms. Rental income and alimony may not be supported by an official IRS document, but nevertheless is subject to being taxed.
“Expenses” are supported by third party statements, receipts, logs and contemporaneous documentations. You should have this before you complete your return.
- Provided by third party: health savings contributions, student loan interest, retirement contributions, mortgage interest, charitable contributions
- Supported by receipts: small business expenditures, rental property expenses, moving expenses, educator’s expenses, medical costs, real property taxes
- Logs / contemporaneous docs: mileage, moving expenses, travel, alimony paid
“Other” deductions or credits available to you are the higher education cost, child care expense and health care coverage. You should receive the appropriate forms from these providers. If you’ve made estimated tax payments, a copy of your canceled checks may suffice.
DO IT YOURSELF
As a confident DIY, completing your own return generally means getting organized and finding the time to complete it. With the use of software, this makes your job somewhat easier. However, I would offer that even though your return seems simple enough, you should still periodically have a professional check or even complete your return. What may seem simple and straight forward may in-fact be hard and confusing. This is especially true when your finances and taxes change due to retirement, divorce, death, major income increases or decreases, tax bracket change, a new child, kids move out, etc.
If you have unresolved IRS or complicated tax matters, I highly encourage you to engage a tax professional. Tax problems don’t disintegrate; they get worse with time if left unaddressed. You should begin by following the above steps to organize your information and then find a trusted tax professional. Some transactions are more complicated and deserve a skilled professional to ensure that there is correct reporting of the income as well as effectively taking all the deductions you are entitle to. Such transactions that need special attention include sale of real estate, like-kind exchanges, installment sales, depreciation, and sale of business property to name a few.
You may not need a tax expert. You might be just right with a tax preparer; but when you do need an expert they are usually worth the investment of time and money ten-fold.
Regardless who prepares your taxes, if you can’t file by April 18th, file an extension. Remember the extension does not grant you extra time to pay; so pay any taxes you may owe. If you intend to contribute to an IRA, do so by April 18.
For more information, contact Tina Perkins, Certified Public Accountant, at (228) 392.2991, or at 4048 Popps Ferry Road, D’Iberville, MS 39540. By appointment only.