It’s the beginning of August and you’re probably not keeping yourself up at night thinking about your taxes. Frankly, who has time to think about itemized deductions and tax-free distributions when you would rather be grilling out, soaking in the sun, or enjoying your family vacation? April 15, 2015, may be more than 260 days away, but now is a great time to look at your taxes and make necessary adjustments to effectively sidestep any potential problems that might cause problems when tax season does arrive.
Consider These Tax Prep Do’s and Don’ts
- Don’t assume that filing your taxes will be the same as the year before. More than 50 tax provisions expired on Dec. 31.
- Do make yourself aware of any changes that have occurred since last tax season. Click here to view the most up-to-date list. Some of the most common expired provisions include:
- Itemized deduction for state and local general sales tax
- Itemized deduction for mortgage insurance premiums (PMI)
- Tax-free distributions from individual retirement plans for charitable purposes
- 50 percent accelerated tax depreciation (“Bonus depreciation”).
- Increased expensing. (This provision allows businesses to deduct the full purchase price of qualified equipment.) Current 2014 provisions are $25,000 deduction with a $200,000 limitation on purchases.
- Do take time to manage your files. It’s much more manageable to file six months’ worth of receipts vs. a whole years’ worth in January. Are you looking for inspiration? Now is a good time to start organizing medical and charitable contribution receipts.
- Do make a note as to whether the size of your household changed.
- Don’t forget to review your withholdings. Did you receive a large refund in 2013? Did you owe the IRS in April? To adjust your withholdings, speak with your payroll representative and complete a new W-4.
- Do send your estimated payments for income to the IRS every quarter to avoid charges and penalties for underpayments. If you forgot to make a payment or you underpaid in April or June, don’t worry. There’s still time to catch up on your September and January payments.
- Don’t underestimate the short-term value of retirement contributions. Aside from the long-term savings benefits, many retirement accounts are a great tax deferral. If you are participating and not maxing out, consider increasing your contribution. Contributions to a Traditional IRA are another consideration.
- Do set aside some time to review your health insurance situation. Alternatively, if you did not maintain health care coverage (and were not exempted) you will owe a penalty with your 2014 1040.
- Do confirm that you comply with the new repair/capitalization regulations.
Tax Prep Help
A few minutes of work and organization now could save you some major headaches in April. Don’t miss out on your opportunity to jump start your tax prep. Want more tax prep tips? Contact Rea & Associates. Our team of Ohio tax professionals can help you determine what you need to do now to ensure tax time goes smoothly for you.
Author: Meredith Mullet, CPA (Wooster office)
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