TAX PREP ALL STATES
It's time to start thinking about getting those taxes done. Maybe you're in a panic. Not to worry. Just follow Schnepper's 15 steps to getting your taxes done, and you'll be much happier. Ready? Here they are:
1. Get serious. Unless you're focused, you're going to see that receipt six times rather than the once you need. This is all mental now. Schedule a time to get to work and commit to that time. Then . . .
2. Get started. Remember that commitment to get to work? Keep it! This step requires action. Get your pencil and take the blank forms out of the envelope where you've been hiding them, praying that the tax fairies would make them go away. My father reminds me of the old Brooklyn proverb, "A trip of a thousand miles begins with a traffic jam." Get in that "jam," and your tax return will begin to jell. Now . . .
3. Get organized. Something has to go on those returns. Get your W-2s together to report wages, your 1099s to report interest and dividends, your 1099Bs for reporting stock and bond sales, and your 1098s for deducting your interest and taxes. The Internal Revenue Service and your accountant both want final numbers. It makes it easier for them and less painful financially for you. Bring either one a shopping bag full of receipts and you're going to feel the pain . . . especially in your wallet.
Tax law changes for 2011
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4. Get informed. Have you been following all the changes the U.S. tax code has seen in the past decade? In April 2011, IRS Commissioner Douglas Shulman reported that there had been about 3,500 tax changes since 2000, including multiple tax measures passed last year and this year. The Bush cuts and many of the "extenders" are scheduled to expire this year. But, Congress is expected to restore many of the expiring provisions. There will be a lot of action in Congress after the election. Keep an eye on what passes, and what doesn't get renewed.
For example, have you looked at the new American Opportunity Tax Credit, which can give you as much as $2,500 in tax savings? If not, get educated! Congress has renewed this one through 2012.
Jeff Schnepper
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If you're "tax simple," the IRS can actually do the return for you, or you can have your return done online -- sometimes even for free. Alternatively, if you're tax-savvy, do your own return after learning the new rules. A good place to start: the IRS' absolutely free Publication 17. It's hundreds of pages of everything you need to know about your 2012 tax return and your planning for 2013. If that's too much, go to a professional.
5. Get help. You might remove a splinter from your own finger, but you wouldn't perform heart surgery on yourself. A trip to a tax professional should at least tell you what you're missing. Don't hesitate to ask for help; it's deductible. But call for an appointment now! The later your accountant does your return, the more tired that tax preparer will be. You want your return done when she's at her best.
6. Get status. Decide how you're going to file. The lowest rates are with joint returns, but if there are potential high medical or miscellaneous deductions, married filing separate may yield a lower total tax. Do it both ways. Alternatively, a single mother may qualify for the head-of-household rates, which are better than the rates for filing as a single. Sometimes, when a joint return isn't practical, even a married person with a dependent child can qualify for head-of-household rates, which are much better than married filing separate. You need to know the rules.
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7. Get adjusted. There are certain deductions that are allowed regardless of whether you itemize. Such deductions include IRA and qualified pension contributions, student loan interest, moving expenses, alimony, medical savings account deductions and, for the self-employed, the health insurance deduction and deduction for half the self-employment taxes paid. These are known as "above the line" deductions. The infamous "line" is your adjusted gross income -- line 37 on Form 1040.
8. Get itemized. Which is bigger -- your standard deduction or the sum of your itemized deductions? We're now "below the line." The instructions for Form 1040 for 2012 list your standard deduction. Compare this amount to your total allowable itemized deductions. That's the sum of your allowed medical expenses, taxes, interest, charitable contributions, casualty and theft losses, and miscellaneous itemized expenses. Always do it both ways -- and, subject to the alternative minimum tax (and don't even try to get into that), always take the higher amount.
9. Get exemptions. For 2012, you get to take off as much as $3,800 from your income for each qualified exemption you have. Despite myths to the contrary, these include children who are full-time students under age 24, regardless of how much income they may have. For 2012, increases in income will no longer decrease your exemption deduction. Back in 2009, on a joint return, your exemption deduction was phased out between adjusted gross income of $250,200 and $372,700. For singles, the numbers were between $166,800 and $289,300. Unless renewed by Congress, this exemption phaseout is scheduled to return in 2013.
TO GET EVERY CLIENT THE BEST AND BIGGEST RETURN FOR THEIR HARD WORK YEAR.
