Though filing your taxes may sound simple, it can become challenging. Missing a few deductions here and there can have a major impact on the amount you owe. According to the IRS, “U.S. Taxpayers and businesses spend about 7.6 billion hours a year complying with the filing requirements of the Internal Revenue Code.” When preparing to file this year, consider these five tips:
- Be aware of deadline changes.
Tax season officially begins on January 19th, 2016. This year, the filing deadline to submit 2015 taxes is Monday, April 18th (with exception to the deadline of April 19th for Maine and Massachusetts). So you have a few extra days to get your documents submitted. The key is to avoid the last minute scramble by knowing how to file and being prepared.
- Take advantage of all the deductions and exemptions that will legally reduce your amount of taxable income.
Not sure what may be tax deductible? If you haven’t already, make an appointment with your tax preparer to discuss your eligible deductions. Be sure to have all your records (receipts, bills, interest payments, etc.) to submit as proof. If you’re a small business owner, consider some of these deductions: business related travel, employees’ pay, business interest expenses, and several others.
- Become familiar with the new tax legislations and how they may impact you.
With the recent passing of the Protecting Americans from Tax Hikes (PATH) Act, several tax breaks have been extended or made permanent. For small business owners, the legislation makes permanent a higher level of expensing under Section 179 of the tax code. Now small businesses can immediately write off up to $500,000 in investments annually. In addition, bonus depreciation will be extended through 2019 – which means businesses of all sizes will be able to depreciate 50 percent of the cost of equipment acquired and put in service during 2015, 2016, and 2017.
Individual tax payers can benefit from the permanent reduced earned income threshold amount of $3000 Child care tax credit. The act also extends through 2016 the above-the-line deduction for qualified tuition and related expenses for higher education. For a complete list of all the tax provisions click here.
- Be sure to have all your documents prepared.
Gather all year-end statements before filing such as W-2 forms from employers, Forms 1099 from banks, Form 1095-A from the Marketplace for those claiming a tax credit. If you don’t plan on filing on your own, contact your CPA office to schedule your appointment. It’s good practice to file sooner rather than later – it will lessen the chances of becoming a victim of identity theft, and if you’re expecting a refund, you will receive your money sooner.
- Take full advantage of tools and information available on IRS.gov.
The IRS recommends using E-file and Direct Deposit as the safest and fastest way to file an accurate income tax return and receive a refund. You should also take precautions for identity theft. This year, the IRS will provide copies of the fraudulent tax return filed by scammers so you can take proper steps to secure your personal information. For more information and FAQs on filing taxes in 2016, check out the IRS’ Interactive Tax Assistant.
For assistance on more complex tax issues or if you are a small business in need of professional tax preparation services, contact our office at 410-453-5500. One of our CPAs will be happy to consult with you. Click here for a list of our services.