With the doubling of the standard deduction and elimination or reduction of several itemized deductions, you might think there aren’t many opportunities left to itemize. That isn’t the case at all, depending on your circumstances. With the recent tax reform, it’s never been a better time to figure out what you can still itemize in 2018 and in future tax years. To keep track of these deductible expenses, it’s important to be organized and maintain a box or folder to store your receipts throughout the year. This level of organization is necessary whether you work with a tax professional or prepare your own taxes.
Deductions fall into these categories:
- Medical and dental expenses
- Taxes you paid
- Interest you paid
- Gifts to charity
- Casualty and theft losses
- Other miscellaneous deductions
Certain categories, including medical and dental expenses, casualty and theft losses, are subject to a floor that only permits you to deduct expenses above certain thresholds, such as 7.5% of your adjusted gross income (AGI – IRS Form 1040, line 38). Your AGI is your total amount of income from all sources after subtracting certain deductions, such as alimony paid, HSA contributions, the deductible part of self-employment taxes, etc. For example, if your AGI is $100,000 and the threshold for medical expenses is 7.5%, then any qualifying expenses above $7,500 can be included and deducted. (more…)
Before filing your tax return, take a few moments to consider the extra ways you can reduce your tax bill and maximize your retirement savings at the same time. Certain retirement account contributions provide tax-deductions or opportunities for future tax planning.
To qualify to contribute to any of the following accounts, you or your spouse must have earned income in 2017. You must open and fund these accounts before the normal tax filing deadline of Monday, April 16, 2018. With one exception, for the SEP IRA, filing for an extension does not extend the time you have to make contributions. (more…)
It’s tax season, and like last year, you received a corrected 1099 in the mail from your account’s custodian, such as Charles Schwab. If you already filed your taxes and are just receiving the corrected 1099 online or by mail, there’s no need to panic.
Revised 1099s are commonplace, and in the majority of cases, the custodian isn’t causing the revisions or holding up the process. Custodians are, however, required to issue a corrected 1099—no matter how insignificant the changes are—so they can give account owners the most accurate, up-to-date information for filing their taxes before the April 15 tax deadline.
To produce a 1099, custodians receive and aggregate all available information relating to distributions made from investments in an account during the previous calendar year. This information includes the character of distributions, such as dividends, qualified dividends, interest, capital gains or return of principal. One such investment is a mutual fund, which is often composed of 100s if not 1000s of securities. A diversified portfolio is often made up of 10 or more mutual funds, and if just one of these securities within a mutual fund issues a correction, the 1099 may need to be revised.
If you received a revised/corrected 1099 and already filed your taxes, you may not have to do anything. The revisions might not be meaningful enough to require filing an amended return. The 1099-DIV, related to the characterization of dividends, is the most commonly revised 1099 form. If the revisions end up being significant enough to impact your tax return, then you can always file an amended return with the correct information. If this leads to a refund, then you have three years from your original filing date to file an amended return to receive the refund. If the revision leads to owing more taxes, filing an amended return as soon as possible will save you on interest and penalties.
Waiting until closer to the April 15 deadline to file your taxes reduces the risk of receiving a corrected 1099 and having to file an amended return reflecting the changes.
The American Taxpayer Relief Act, passed by Congress on January 1, 2013, contains many far-reaching tax provisions. In addition to extending many tax items that had expired or were due to expire, the act also made permanent many provisions of previous tax acts. The tax features of this act are too numerous to list here, but the most comprehensive description of these changes I have found is this Journal of Accountancy article.
I highly recommend you read this article or consult a qualified tax professional to assess the impact of this act on your personal situation.
As we near the end of 2012, it’s time to start thinking about your finances for 2013. While some year-end planning might still be needed, it’s not too early to start thinking about next year. Many employers will start having their open enrollment periods over the next few weeks, and this is a great time to review your retirement plan contributions.
The new 2013 retirement contribution limits are as follows:
- The elective deferral contribution limit for 401(k), 403(b) and most 457 plans increased to $17,500 from $17,000 in 2012.
- The catch-up contribution limit for employees aged 50 and older into those same plans remains unchanged at $5,500 for 2013.
- The maximum total contributions into a defined contribution plan rise to $51,000 for 2013 compared to $50,000 for 2012. For those aged 50 and older, the limit is $56,500.
- If you participate in a Simple IRA plan, the salary reduction contribution limit increases to $12,000 in 2013, up from $11,500 in 2012. The catch-up contribution remains at $2,500.
- The limit for IRA and Roth contributions increased to $5,500 from $5,000 in 2012. The catch-up contribution remains at $1,000 for 2013.
- For traditional IRAs, there are a few different scenarios where different income limitations apply. These income limits increased from years prior and need to be looked at in more detail for each specific situation.
- For Roth IRAs, the AGI phase out range is $178k-$188k for married couples filing jointly. For single and heads of households, the phase-out range is $112,000-$127,000.
If you’d like to learn more, you can read the IRS press release here.