Tax advice from a pro as 2016 wraps up

Yes, it’s that time of year again. A whole year has flown by, making today the perfect time to start preparing for the time-honored tradition of filing your tax return.

The easiest place to start is by compiling a list of the things you need by looking at the type of income and expenses reported on your return from last year. If your family or employment status has remained the same, last year’s return may contain clues to the statements and information you need to watch for this year. After reviewing last year’s tax return, bring it with you to your tax appointment. Your professional tax preparer can spot things on the return that you may have overlooked. If you are using a professional, they may have software that can produce a tax organizer. This will have a list of the documents you used last year to prepare your tax return.

Next, gather all the income statements you received. This includes all your Forms W-2, Forms 1099, and Schedule K-1s for taxpayers who are owners of an S corporation or a partnership. A Schedule K-1 is also issued to taxpayers who received income as a beneficiary of an estate or trust. Often, the Schedule K-1 is not mailed until later in the filing season, so if you are expecting one of these, wait to receive it before you file.

Other income items may include profits from selling an asset, such as stock, or any other income-producing property you own. It’s important to know how much you paid for the assets, how they were acquired, and when they were acquired. Only the profit is taxable. If you sold a primary residence, the gain may or may not be taxable. If you can’t determine the cost of an asset, the Internal Revenue Service (IRS) will assume it is zero. This results in the entire gain being taxable, and you will wind up paying more in taxes than necessary. If you sold any of the items above, it would be good to meet with a tax consultant to determine if there are any tax-saving strategies to implement prior to December 31, 2016.

Be careful not to overlook any medical expenses, property taxes, mortgage interest, employee business expenses, and charitable contributions. Bring in all the expenses you incurred during the year, along with documentation showing when you paid them. If you made charitable contributions of $250 or more at a time to one organization, you must obtain a statement from the charitable organization before your return can be filed. You must also have written documentation (such as receipts or canceled checks) of all cash donations, regardless of the amount. Other deductible expenses include moving expenses, casualty losses, and costs incurred for the care of your children while you work.

If your tax situation changed dramatically throughout the year, it is a good idea to meet with a tax consultant prior to year-end to ensure you have covered all your tax bases. There are strategies to put into play prior to the end of the year to help you save tax. For example, if you sold highly appreciated stock, but have other stocks in a loss position, it would be a good idea to offset some or all of the gain by selling some of the losers. If you itemize, it is possible to transfer highly appreciated stock to a charity and avoid the gain as well. Tax strategy is very complex and the right professional should be able to assist you in minimizing your tax burden. The best way to accomplish this is to meet prior to year end as the options are greatly reduced after the end of the tax year.

Whether you prepare the return yourself, or hire a professional to do it for you, being organized pays off. A professional tax practitioner can help you sort through the mounds of paper you have gathered and look for information that will allow you deductions under the new rules.

If you would like assistance with proactive tax management, give HLM a call at 404-836-1120. HLM is celebrating 30 years of business and would like to thank the community for your support for the past 30 years!