In my line of business, January is the time of year when the phones start ringing off the hook with concerned people asking “What can I deduct on my taxes this year?” Now “Will New Tax Legislation Affect My Taxes This Year?” Now “my deduction statements haven’t arrived yet, what do I do?”
These questions are answered in each year’s mission to educate people on what they need to know about taxes, and this year is no different. Filing the 2012 income tax return has created tax-induced anxiety for some people due to ongoing political discussions about the “Fiscal Cliff” and our economic situation.
However, there is no need to panic. Planning is one of the best remedies for a smooth tax filing experience. To help you with that, this article provides information to use as a guide during the 2013 tax season.
Your tax return may be bigger than you think.
The American Taxpayer Relief Act of 2012 stems from new legislation Obama signed into law in January and provides “carry-over” provisions that extend various tax cuts that were set to expire in 2011 through December 2012 (meaning you can keep more than money you have). you work so hard for.)
Tax deductions 101
About two-thirds of taxpayers choose to use the standard deduction method instead of itemizing. Although itemizing can be more work up front, if you own a home, have a child/children, donated large portions to charity, etc., you could lose some of your money if you don’t itemize. I’ll save the intricacies of this topic for another article and just say that some deductions are only available if you choose to itemize. Visiting the IRS website at http://www.irs.gov or speaking with a licensed tax professional, such as an enrolled agent or CPA, will provide you with the in-depth knowledge you’re looking for to file your return. In the meantime, I have provided some general examples.
• Medical Expenses – Are your total medical expenses equal to more than 7.5% (this number will increase to 10% in 2013) of your adjusted gross income? If so, then this qualifies as a valid deduction.
• Business-Related Expenses – Job search expenses, ie travel interviews, resume printing, and job relocation at least 50 miles away, are all deductible. Are you an independent worker? If so, you can also deduct expenses related to home office dedication and other business purchases.
• Mortgage expenses: Points paid on your home mortgage may be deductible. Even death refinancing expenses can be deducted.
• Charitable Donations – Giving money and other items of value to charity is deductible. Gas mileage and other expenses related to the volunteer activity are also worth looking at for possible deductions.
• Higher Education: The Irs limits taxpayers to one tax deduction per filing. ELIGIBILITY FOR HIGHER EDUCATION TAX DEDUCTIONS DEPENDS ON YOUR INFIEM AND TAX STATUS.
Late Deduction Filings
Depending on how elaborate your financial situation is, you may receive some forms after the April filing deadline. However, if you plan ahead and file an extension, the wait will be a little easier. I have listed some of the forms that are known culprits for being late.
• Form 5498 (IRA Contribution Form)
• Form 5498-ESA (Contributions to Coverdell-TrainLely Known as Education ISS)
• Schedule K-1 (if you have received compensation from an estate, trust, partnership, or corporation)
These are just a few guidelines to help answer questions related to filing your 2012 instructional tax return. Consult with your enrolled agent or CPA for a more seamless and personalized tax filing experience.