Tax time

[Hem]

This is our first year filing with our little bundle of tax deduction. Any recommendations on someone to file with? Or should I just go turbo tax style? I just don't want to miss anything..

Also wondering if it's worth itemizing?

Any input would be greatly appreciated!

[bullsbucsfan426]

1. Depends on how complex your return is. I don't know what you do, but if you've got a lot of itemizing, your own business, or you're claiming a lot of credits, it's probably better to file with someone. In all honesty, it WILL cost you a lot more though. Turbotax is cheap compared to the tax services (I work for one). 

 

2. As for itemizing, here's what you need to do. 

 

Combine the income you got from your wages (see box 1 of your W-2(s)), any stock sales you had (short term capital gains is taxed same as your wages, long term capital gains are taxed at a lower rate), any interest and dividends, and any self employment income (as well as anything you might have in income terms). Then do the following. 

 

     A. Multiply the total income by 10 percent. Compare your medical expenses against that number. Include all health insurance you paid yourself, out of pocket hospital costs, anything you paid for eye care (that's deductible too), dental costs,and any other medical expense you think you had. If your medical expenses are more than 10 percent of your income, slash off the ten percent from the total expenses and you have your medical deduction. Write that down. 

 

     B. Next is taxes. Did you buy a new car last year? Any other large purchases? Go look at your sales documents and see how much the sales tax was. That's deductible. HOWEVER-if you have state withholding on your W-2, check to see which amount is more. Take the higher tax amount and add it to the calculation. THEN, if you paid any property taxes, add that in too. You can also add any foreign income taxes if you like, but truthfully that's better taken as a credit (since it results in dollar for dollar savings on your tax bill). 

 

    C. Next is mortgage interest. Do you have a mortgage on your home? If so, the bank should have sent you a Form 1098. The 1098 will show you how much interest you paid. That is all deductible. HEADS up-you can usually find your property tax records on this sheet too, if you're paying everything through your mortgage payments. The bank all pays it through an escrow account. Add the mortgage interest to the calculation. NOTE-if you did any private lending, that you didn't receive a 1098 for, you can still deduct it. Just ask your lender for a record of how much interest you paid. 

 

   D. Do you have any charitable contributions? You should have an official record from the organization showing how much you donated. If it was property, they should have given you a record showing the Fair Market Value at the time of donation. If they didn't, I recommend googling online to get a ball park idea. Ebay is handy. 

 

 E. Were you in any car crashes or other unexpected disasters (earthquake, fire, your roof collapsed due to snow). Congratulations! That stuff (less insurance reimbursements) is deductible! If you were in a car crash, what I usually do is just take the Kelley Blue Book Value of the car before the crash, and then I subtract out any insurance proceeds. 

 

F. Finally, and this one can be big for you-employee business expenses. If you are an employee (not a business owner), then you can write off certain expenses. These include dry cleaning and suit purchases (believe it or not, if you need them for your job they're considered "uniforms"). Any Continuing professional education you had, basically anything related to your job that you weren't reimbursed for. ONE BIG CAVEAT-you can't deduct commuting mileage if you're an employee. 1099 contracters get to, but not W-2 employees. However,  you can deduct from business to business mileage/expenses. You can take the standard mileage deduction (around 50 cents per mile driven) or your actual expenses (this can get a little more hairy, but your gas, insurance, etc.). The car deduction is rather messy and I don't recommend taking it if you haven't kept a mileage log of where and when you drove for what. Also be aware-once you calculate your total business expenses, you need to shave two percent of your income (same number as the medical expenses earlier), to arrive at your deduction. 

 

After. you do all this, compare your total amount against $12,200. If you clear that bar by at least $500, I'd recommend you go ahead and itemize. If it's close, go ahead and take the standard deduction-otherwise you have to keep all those expense records for 3 years and record keeping for that little really isn't worth it. 

 

Questions? I'm open to any other questions from anyone. 

 

Hem-see your inbox. I'll message you my phone # if you have any further questions. 

 

EDIT: Apologies, I forgot to add this. If you're married, compare against the $12,200 number. If you're single, use $6100. If you're not married but have kids, use $8950.

Edited February 16, 2014 by bullsbucsfan426

[Hem]

Wow thanks for all the info! I don't own my own business, and I work for the federal government...I just don't want to miss anything by filing a simple return. Wife is stay at home now and we are filing jointly.

Time to spread out all my tax forms and see what's what.

[Bull Martin]

That was an amazing write up.

 

Hem, even if you decide to go to a person, you can run all your information through turbo tax before you do.  I don't think you pay for it until the end.  So you can make sure you've at least compiled all your documents and have a rough idea what's going on before you go.

[bullsbucsfan426]

That was an amazing write up.

Hem, even if you decide to go to a person, you can run all your information through turbo tax before you do. I don't think you pay for it until the end. So you can make sure you've at least compiled all your documents and have a rough idea what's going on before you go.

Thanks Martin but most of this is pretty basic stuff. I've done returns with itemized deductions in 30 minutes if there are no states involved. Even then state returns for most folk are calculated by the software with a few extra questions for the most common credits. 99 percent of people don't even have state credits to claim.

[Fold FB Invest in BB]

Wow thanks for all the info! I don't own my own business, and I work for the federal government...I just don't want to miss anything by filing a simple return. Wife is stay at home now and we are filing jointly.

Time to spread out all my tax forms and see what's what.

 

 

When Mrs. Hem goes back to work, get you one of these (if your employer offers it):

 

http://en.wikipedia.org/wiki/Flexible_spending_account#Dependent_care_FSA

[Bulls_Tech_11]

Hem, you could also use tax act online if your return is not complex. You can file for free on federal returns and it uses the same backend as other programs. This year I'm stuck going to someone as the wife started her own business. But after I see what they do I plan on going back to using it.

[willia33]

Any recommendations for a tax advisor for tax planning purposes (during the year advice to lower potential taxable income)?

[Hem]

Thanks for the rest of the tips guys. I'm working on itemizing now, seeing if I can meet that 12.7k threshhold.

 

And Bull Martin, that's the game plan. My in-laws have turbo tax this year and said we can use it if we want. I'm going to run my numbers through there first and see where we stand.

[bullsbucsfan426]

Any recommendations for a tax advisor for tax planning purposes (during the year advice to lower potential taxable income)?

 

Best advice I can give you for tax planning is to get out your last year return. Go get a copy of your year to date pay stub every three months and compare. If you have any new expenses that total up to an amount greater than the standard deduction, subtract it from your income on an annual basis (i.e. multiply it by 4 in the first quarter, 2, in the second quarter, etc.). If you see yourself behind on payments or where you want to be with a refund, go to your employer and adjust your withholding. Most people don't need to do much more tax planning than that.