TAX TIPS BY GUEST BLOGGER, STEPHEN KOSAR, CPASubmitted by Reby Advisors | Certified Financial Planners | Danbury, CT on June 20th, 2014
The blog this week is written by our guest blogger, Stephen Kosar, CPA of Kosar & Company, PC which is located in Danbury, CT.
Most Overlooked Items on Tax Returns:
1) Checking to see if you qualify and if an IRA contribution can be made.
2) Personal property taxes on vehicles paid by Connecticut residents are deductible on the Federal return if you itemize and can provide a credit on the Connecticut return depending on income levels.
3) Know the rules so you can determine if you qualify to deduct medical or miscellaneous deductions. Know what expenses are deductible for medical and miscellaneous. New rules state you can deduct medical expenses if greater than 7.5% or 10% of AGI (Adjusted Gross Income) depending on your age and you can deduct miscellaneous expenses if greater than 2% of AGI. (You can go to irs.gov and go to the 1040 instructions to review what is deductible.)
4) If you have a schedule C business, there are a large number of additional items that need to be reviewed to make sure all allowable deductions are being taken.
5) Forgetting to include income items and receiving balance due notices later.
Last Minute Tax Tips:
The best tax tip is to be organized and to be aware of what you need to prepare your return. You should provide your CPA with all the information that is required to prepare a complete and accurate return. You should be familiar with the return and your preparer should explain your return so that you understand it. You should have a list of questions that you want to ask your CPA.
Most Common Misconceptions that People Have:
1) Tax returns are easy to prepare: Some are, but many are not. The more complex, the more time to complete and the larger the tax return preparation fee can be. Some people think they are saving money by not paying a CPA to prepare their returns, only to overpay taxes by missing deductions or they pay interest and penalties by not including income or not paying in enough taxes during the year. Sometimes this can be more expensive than the tax prep fee.
2) The CPA can go over all the tax laws with you: The tax code is so large and complex that it is impossible to spend that much time with each client. With new clients we always look over the prior year federal and state returns to see what taxpayers have, to look for any errors or missing items and ask the taxpayer as many questions as we can. But this is why taxpayers need to understand what is needed to assist the CPA to make sure that all the necessary information is there. We will send out a tax organizer to any client that uses them or requests one to assist in the process.
3) Taxes are something you do once a year: Tax planning during the year and especially before the year ends is the most important thing you can do to avoid surprises when you file in February, March or April. This avoids finding out that you owe an unexpected large amount of tax or have interest and penalties because you did not pay in enough tax during the year.