It’s Tax Time 2019, Time to Gather Your Information for Your Tax Appointment
When we say Tax Time 2019 is just around the corner, like most taxpayers, you are finding yourself with the massive chore of pulling together the records for your tax appointment. The difficulty of this task depends upon how well you maintained your tax records throughout the year. This is Part 1 of Tax Time 2019 is Around the Corner, Are You Ready? No matter how good your record keeping was, arriving at your tax appointment full and accurate tax information will give us more time to:
- Consider every possible legal deduction;
- Evaluate which income reporting methods and deductions are best suited to your situation;
- Explore current law changes that are affecting your tax status; and
- Talk about tax-planning alternatives that could reduce your future tax liability.
New for 2018 Tax Filing
There are a number of new complications this year, including:
- To combat tax fraud, the IRS is requiring all tax preparers to verify their clients’ identity with a government picture ID, although there is an exception for clients if the preparer has had a multi-year business relationship with a client AND has previously verified the client’s identity with a government picture ID. Since that was not previously required, it will be necessary for all clients this year, so be sure to bring a picture ID (also a requirement for a spouse) to your appointment.
- Although the federal government changed its tax rules with the tax reform, many states with state income tax, such as California, have not conformed to the federal changes, which means a separate set of rules may apply to your state and federal tax returns.
- The tax reform added a new 20% deduction for pass-through income from business activities. In some cases, the computation can be very complicated and will take additional time.
Choosing Your Best Alternatives for Tax Time 2019
The tax law allows a variety of methods of handling income and deductions on your return. The choices you make as you prepare your return will often affect not only the current year but also future returns. Topics these choices relate to include:
If you’re receiving payments on a sales contract over a period of years, you can sometimes choose between reporting the whole gain in the year you sell or over a period of time as you receive payments from the buyer.
You’re able to deduct the cost of your investment into certain business properties. You can either depreciate the costs over a number of years or, in certain cases, deduct them all in one year.
Where to Begin for Tax Preparation Appointment
Preparation for your tax appointment should begin in January. Right after the New Year, set up a safe storage location, such as a file drawer, cupboard, or safe. As you receive pertinent records, file them right away, before you forget or lose them. Make this a habit, and you’ll find your job a lot easier on your appointment date. Other general suggestions to prepare for your appointment include:
Segregate your records according to income and expense categories.
File medical expense receipts in one envelope or folder, mortgage interest payment records in another, charitable donations in a third, etc. If you receive an organizer or questionnaire to complete before your appointment, fill out every section that applies to you. (Important: Read all explanations, and follow the instructions carefully. By design, organizers remind you of transactions you may otherwise miss.)
Do you have foreign accounts?
Call attention to any foreign bank account, foreign financial account, or foreign trust in which you have an ownership interest, signature authority, or controlling stake. We also need to know about foreign inheritances and ownership of foreign assets. In short, bring any foreign financial dealings to our attention so we know if you will have any special reporting requirements. The penalties for not making and submitting required reports can be severe.
Did you purchase health insurance from the Government Marketplace?
If you acquired your health insurance through a government marketplace, you will receive Form 1095-A, issued by the marketplace, which will include information needed to complete your return. In addition, you will need to provide proof of insurance to avoid a penalty or qualify for one of the many exemptions from the penalty. If you received a hardship penalty exemption from the marketplace, you will have been issued an exemption certificate number (ECN), which must be included on your tax return. The 1095-A and ECN documentation need to be included with the other material you bring to your appointment. If your insurance coverage was through an employer and the employer issued a Form 1095-B, Form 1095-C, or substitute form detailing your coverage, bring it to the appointment.
Do you have all your annual income statements?
Keep your annual income statements separate from your other documents (e.g., W-2s from employers; 1099s from banks, stockbrokers, etc.; and K-1s from partnerships). Be sure to take these documents to your appointment, including the instructions for K-1s!
Do you have questions for your tax preparer?
Write down your questions so you don’t forget to ask them at the appointment. Review last year’s return. Compare your income on that return to your income for the current year. A dividend from ABC stock on your prior-year return may remind you that you sold ABC this year and need to report the sale, or that you haven’t yet received the current year’s 1099-DIV form.
Do you have all the Social Security Numbers and Tax Identification Numbers for all your dependents (SSN, TIN, EIN)?
Make sure you have Social Security numbers for all of your dependents. The IRS checks these carefully and can deny deductions and credits for returns filed without them. Do the same for any Employer Tax Identification Numbers you have for your business or Tax Identification Numbers you use for tax purposes.
Did you compare your previous year’s deductions?
Compare deductions from last year with your records for this year. Did you forget anything?
Do you understand all your documents and financial papers?
Collect any other documents and financial papers that you’re puzzled about. Prepare to bring these to your appointment so you can ask about them.
Review Every Document for Accuracy and Details
Make sure you review personal data to ensure the greatest accuracy possible in all detail on your return. Check names, addresses, Social Security numbers, and occupations on last year’s return. Note any changes for this year. Although your telephone number and e-mail address aren’t required on your return, they are always helpful should questions occur during return preparation.
Did Your Marital Status Change?
If you had a change in your marital status during the year, list the dates and details. Such as living apart from your spouse, or death of your spouse during the year. List it all. Bring copies of prenuptial, legal separation, divorce, or property settlement agreements, if any, to your appointment. If your spouse passed away during the year, you should have a copy of his or her trust agreement or will available for review.
Do You Have Dependents
When you have qualifying dependents, you will need to provide the following for each in the list below. (This is true even if you gave us the information for Items 1 through 3, you will not need to supply them again. Accuracy is important.)
- First and last name
- Social security number
- Birth date
- Number of months living in your home
- Their income amounts (both taxable and nontaxable). If your dependent is your child over age 18, note how long the child was a full-time student during the year.
For anyone other than your child to qualify as your dependent, they must pass five strict dependency tests. If you think one or more other individuals qualify as your dependents (but you aren’t sure), tally the amounts you provided toward their support vs. the amounts they provided. This will simplify the final decision.
Additional Tax Time 2019 Transactions That Deserve Special Treatment
Next week, we will post about certain transactions that require special treatment on your tax return. We will discuss sales of stock or other property, real estate transactions, identity theft, charitable giving, and gifts and inheritance just to name a few. It’s a good idea to invest a little extra preparation effort when you have these types of transactions.
Do you have questions about Tax Time 2019 and what qualifies?
For any questions about assembling your tax data prior to your appointment, please give this office a call. Alex Franch, BS EA at 781.849.7200 or email the office at email@example.com to secure help with your small business accounting needs. Also, you may book an appointment online here and you can meet with any of our tax experts. We are available by appointment at our three convenient locations in Norwell, South Weymouth and Dedham, Massachusetts.
Alex Franch, BS EA
Alex is a Tax Specialist and Partner at Joseph Cahill & Associates / WorthTax. He has a diverse background including a Bachelor of Science from Boston College in Mathematics and extensive military service. Alex is an Enrolled Agent and has a decade of tax preparation experience. He is passionate about serving businesses with tax and financial planning strategies. Mr. Franch is licensed by the Financial Industry Regulatory Authority (FINRA). He holds a Series 6, 63, 65, and 7, and by the Commonwealth of Massachusetts Division of Insurance. Alex Franch is a registered representative of, and offers securities and investment advisory services through, Commonwealth Financial Network. He is a registered broker-dealer, Member FINRA/SIPC.
Sources and Resources
- Get Ready for Tax Time 2019, Are You Ready Part 2
- 12 Easy Way to Get Your Personal Finances in Shape for 2019
- Holiday Gifts with Tax Benefits
- Protect Tax Data, Keep All Sensitive Tax Data Safe
- Tax Reform is Confusing Part 2
- Tax Reform is Confusing! Here is a Side by Side Comparison Part 1
- Natural Disaster Relief
- We Have a New Tax Preparation Office
- Emergency Savings: 67% of People Don’t Even Have $500 Emergency Fund
- Did You Donate to Charity?
- Don’t Expect the IRS to Take Your Word on Charitable Deductions – Substantiate
- Charitable Contribution: Tax Plan for Potential IRA-to-Charity Provision
- Home Office Tax Deduction Good or Bad?
- 529 Plan: Higher Education, Learning the Hard Way
- Minimizing Tax on Social Security Benefits
- Employee Business Expenses: Tax Reform Suspends Tax Deduction