Ready or not, here it comes. Tax Season is upon us. A few tips here might make tax filing a little easier for our readers. Pointers were gleaned from a multitude of sources.
If not already done, gather the documents needed for income tax filing. Designate a box or folder to collect the assortment of W-2s, 1099s, K-1s and other income statements. These might be from employers, businesses, banks, brokers and others.
While adding each form to the pile, verify it for accuracy. If there are any errors, do not procrastinate. Contact the issuing company and request a corrected copy immediately. Ensure that all necessary documents have been received and are conveniently available to prepare filing.
Tax-related documents need to be retained for several years. Consider scanning and storing electronically. At the very least, take backup photos of documents with a phone.
To be useful for tax deductions, mileage logs need to be saved. Business miles, medical miles, charitable miles and moving miles all need to be accurately listed by dates and totaled.
Consider if a child needs to file a return. A child who earned more than $13,850 probably needs to file. File for a child who has investment income over $1250. Tally dividends, interest and capital gains to determine the total of a child’s investment income.
Realize that there still is time to make 2023 contributions to an IRA retirement account or an HAS health savings account. The deadline is when taxes are filed or April 15, whichever comes first.
The maximum IRA contribution is $6500, except those 50 or older get an extra $1000 allowance. The HSA maximum contribution is $3850 for a single taxpayer and $7750 for a family.
It is possible to apply for a tax filing extension, but those who owe still must pay by April 15. This payment generally is made on an estimated tax liability even if the tax form cannot be completed on time.
Determine the deadline for tax filing and set a calendar reminder. April 15 is the deadline for individual income tax returns. Shareholder and S-corporation business returns are due March 15.
Make the decision to either itemize deductions or take the standard deduction. Itemizing requires much more effort and documentation. It is often easy, convenient and worthwhile to take the standard deduction on the federal income tax return.
The federal government allows several other deductions on top of the standard deduction. Retire contributions, health savings account contributions and some student loan interest can reduce tax liability. The deductible part of self-employment tax and certain alimony payments may qualify as deductions.
A taxpayer may choose to gather receipts and itemized deductions. The total must exceed the standard deduction to be a benefit for federal tax liability. Consider the following as possibilities for itemization.
While limitations do apply, some state and local taxes may be itemized. Mortgage interest with limitations also is tax deductible.
Excessive unreimbursed medical and expenses are deductible. The rule is that they must exceed 7.5 percent of adjusted gross income.
Large charitable contributions may be deductible. There are certain limitations and guidelines. Some generous givers bundle charitable contributions in alternate years to take advantage of the deduction every other year.
Many folks use the standard deduction on their federal income tax return. Keep in mind, though, that there may be a savings on state taxes by itemizing deductions.
As always, the pointers here are only for consideration. Please consult a tax advisor regarding individual circumstances and to determine the best course of action.
After following prudent tax procedures, enjoy spending the savings locally. Invest in neighborhood businesses to build a strong community.
(Janet Miller is a freelance writer specializing in family faith. She offers Family Prayers and Activities: Weekly Guides on compact disc for families to explore the Bible together. Email jmiller@dospalos.org.)
