We are now in the midst of it—tax season, that is. Are you ready? Perhaps you’ve already filed and managed to get the process out of the way earlier than most.
That’s a good thing, as filing your 1040 before April 15 will put you in a position for an earlier refund. It’s also smart to get a head start, since the deadline seems to creep up quicker than people realize.
If you’re like many people, however, you’re procrastinating the dreaded task of getting all your ducks in a row in order to meet with a tax professional. Following are a few tips for getting a jump on this year’s tax season:
1. This may sound obvious, but it’s important to supply your tax preparer with the appropriate paperwork. If you own a business, having all those precious documents in hand, such as W-2s and 1099-MISC forms, will save precious time and money.
2. Make sure to bring a record of all your out-of-pocket expenses as well—from tuitions or student loans, to medical costs and other miscellaneous fees associated with your work.
3. Hopefully you’ve also kept records of all the charitable contributions you made in 2014, as well as documents detailing your mortgage interest and other property taxes.
Following is a list of a few things people often forget to give their tax professional: social security numbers for new babies; logs of unreimbursed mileage (think work-related trips for which you weren’t compensated); vehicle tax statements; and real estate tax receipts and refinance closing letters.
One more thing: if you pay for your own health coverage, you should have been sent Form 1095-A by the end of January. On this form, you fill out who pays premiums, and the amount of any monthly subsidies.
Your tax preparer can fill in details into Form 8962, which explains the breakdown on insurance, subsidies and income for your household to the IRS. If you were only self-insured for part of 2014, your preparer must note any subsidy payments by the month.
It’s a good idea to check with a financial professional before you file your taxes to make sure you’re not missing anything. For instance, if you rolled over a 401K account into a Roth IRA, you will need to supply your tax preparer with paperwork necessary to calculate the taxes you owe on that account (with a Roth, you’ll only have to pay those taxes once).
As we report taxes from 2014 and head into a new year, it’s also wise to review the dollar limitations for pension plans and other retirement-related items for 2015.
Many of the pension plan limitations have changed for 2015 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.
Highlights include the following:
• The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
• The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.
• The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
While preparing to file your taxes may not seem like a fun task, by getting a jump start you can check it off your to-do list sooner. That way you’ll be able to focus on the more exciting and fulfilling parts of your career, business, family or life.