It’s Never Too Early To Get Ready For The 2017 Tax Season

tax season

 

April 18 is almost a distant memory for most of us. Tax returns or extensions are filed, documents stored, and refunds are on their way to our bank accounts if not received already.

If tax season 2016 was too hectic for your tastes, there are ways you can prepare for a smoother 2017 tax season by preparing early. Mid-year is the perfect time to assess your individual tax scenario.

Keep track of these milestones:

  • Birth or adoption of a child
  • Marriage or divorce
  • Transferring or relocating for work
  • Change in military status or activity
  • Death of spouse
  • Receiving lump sum distributions, inheritances or settlements
  • Starting or selling a business
  • Establishing a home office
  • Significant medical expenses not covered by insurance
  • Job search expenses, including mileage, lodging and relocation expenses
  • Collecting Social Security, Unemployment or Social Security Disability Insurance benefits

Each of these milestones will affect your tax status for 2017. Now is the time to consult with a tax pro who can advise you on the best tax strategy for these life events.

Understand the updated tax laws for 2017

Tax laws change frequently at the state and federal level. These changes can include:

  • State tax regulations
  • Itemized deduction allowances
  • Changes in tax credit programs, eligibility or regulations
  • Changes in trust and estate regulations
  • Retirement account contribution limits
  • Income limits for contributions to a Roth IRA

You can begin researching these changes through your state revenue department website, IRS.gov website, or community resources such as  workshops or lectures.

You’re not alone, however, if you find the language of these regulations confusing or difficult to understand. Always enlist a qualified tax pro if you need clarification on any tax matter, particularly changes in tax laws or regulations.

If you are a low wage earner, disabled, or a senior, you can access basic tax advice through the VITA program beginning in January of each year. Trained volunteers will assist you with any basic tax questions as well as provide tax filing assistance.

File early

Identity theft and tax  fraud are on the rise. Filing early in the tax season will prevent an identity theft ring from attempting to file a fraudulent tax return under your name and social security number.

Last but not least…

Organize your tax documents throughout the year. If you haven’t done so already, set up a filing system for your paystubs, receipts, freelance/side job income, medical/dental expenses, and home office expenses.

There are also many spreadsheet and basic bookkeeping programs and apps available to help you keep record of your income, expenses and deductions throughout the year.

Staying organized year round will eliminate the last-minute rush to gather paperwork and records on tax filing day, making things easier for you and for the tax pro who will be filing your return.

Mid-year is a perfect time to prepare for the 2017 tax filing season. Make note of any significant life change, stay current on changes to tax laws and regulations and file early in 2017.

Don’t Overlook These 5 Tax Breaks

Freeimages/Paige Foster
Freeimages/Paige Foster

Don’t overlook these last-minute tax breaks

Part 3 of a 4-part series

Year-end tax planning may yield some pleasant surprises in the form of tax breaks you hadn’t thought of before. Take a look at these five possible tax breaks and see if they may be an option for you. 

Always check with a qualified tax pro to see if you meet the requirements for any of these tax breaks. 

1.  Earned Income Tax Credit (EITC): While this credit is only available if your income falls within the low to moderate range for your household size, don’t count it out if you’ve had some significant changes to your earnings this year. Those changes can include:

  • Job loss or layoff
  • Significant cut in pay or hours
  • Disability

If you’ve experienced any of these events this year, chances are you struggled with significantly less income than in prior years. Check with a tax pro to see if you are eligible for the EITC for this year. 

2.  Jury duty fees paid to employer: If your employer pays your full salary while you’re on jury duty, they may ask you to turn over your jury duty fees (paid to you by the court) when you return to work. 

Even though jury fees are  miniscule in comparison to your income,   the IRS still regards them as taxable income. Be sure to deduct those fees from your taxes, so you aren’t taxed on money that was passed directly to your employer. 

Be sure to save any statement or receipts verifying the jury duty payments.

3. State taxes you paid last year: If you ended up owing state income tax last year, be sure to include that amount on this year’s return as an itemized deduction. You may also include any estimated quarterly income taxes you’ve paid as well. 

4. Self-employed health insurance premiums: If you’re self-employed, you know firsthand that insurance coverage isn’t cheap. The IRS understands this and allows for self-employed workers to deduct insurance premiums for medical, dental and long-term care insurance. 

This deduction includes insurance premiums paid for yourself and your dependents. You can include this figure as an itemized deduction on Schedule A of your 1040 tax form. 

5. Protective clothing required for work: If your line of work requires you to wear protective clothing, you’re in luck. Items such as hard hats, goggles, work boots, and fire-retardant outer wear are just some of deductible items. 

There is a catch, however. The clothing items can’t double as street wear, and they must be required by your employer. You’ll deduct the cost of these items on Schedule A of your federal tax return. 

As with any deduction, always check with a tax pro to see if you’re eligible. 

These easily overlooked tax breaks can take the sting out of tax day. Gather your receipts and tax records, talk with a tax pro, and get ready to enjoy a lower tax liability for your 2015 taxes. 

How To Avoid Tax Season Rip-Offs

Tax season will be here before you know it. No sooner will the holiday rush be over and you’ll have to get ready for tax day. Identity thieves and other rip-off artists know this as well, and will be on the prowl for vulnerable people. Here’s how to avoid falling victim to a tax season scammer:

Never disclose personal information over the phone or by email unless you initiate the call yourself. A popular tax season scam involves identity thieves calling or emailing unsuspecting taxpayers and impersonating IRS agents. They will typically request your social security number in order to “verify” account or to determine whether or not you will be receiving a refund. Don’t fall for it.

If you receive such a call or email, don’t comply with their request and report the call or email to local law enforcement. The IRS will never call a taxpayer first. Their first line of contact with you will be via mail. It is then up to you to call them at the number listed on the letter or notice.

The IRS will also never correspond with you via email. No matter how “official” the fake IRS email appears to be, do not click on any links or reply to it in any way. Instead, forward it to local law enforcement and/or the IRS fraud investigation unit.

Safeguarding your Social Security Number(SSN) is the best defense against tax season scam artists. Never carry it in your purse or wallet; if they’re lost or stolen thieves can get their hands on your social security card and wreck havoc, sometimes destroying your credit rating by applying for credit accounts in your name.

Never give your SSN to just anyone: legitimate parties will only ask for it if it is required, such as your HR department at the time you’re hired, or the bank or IRS when establishing or verifying an account.

Use only reputable tax prep companies when filing your taxes. Ignore the ads on Craigslist before and during tax season. If you choose to have a professional prepare and file your return, make sure they are affiliated with either a large tax prep firm, a CPA practice, or  tax law firm.

If you’re taking the DIY approach to tax prep this year, use only trusted online portals and apps. If a tax prep website or app looks shady, it most likely is shady. The IRS offers a free online tax prep suite through their website.

The months leading up to tax season and tax season itself is the peak period for identity thieves and assorted other scam artists. By protecting your private information and your SSN, you can protect yourself and your family from the long-term consequences of identity theft.