Winter is fading away, and the 2016 tax season is now upon us. Unfortunately, with the tax deadline fast approaching, many of us are feeling stressed. To help alleviate some of your stress I have put together a quick list of tax tips to help you get past the finish line. Remember to always to consult your CPA or tax advisor before implementing any tax strategies herein.
New Tax Deadline - In 2016 you will have a few extra days to complete your tax return. Federal law mandates that any holiday in the nation's capital also applies to offices there. Due to Emancipation Day falling on April 15th, the usual due date for annual 1040 filings is pushed back to Monday, April 18th. Taxpayers in Massachusetts and Maine get an extra day because of Patriots Day. The due date for filing 2015 personal income tax returns for MA and ME residents is Tuesday, April 19th.
Itemized Deductions - Most individuals remember to deduct the state income and real estate tax they paid; however, not everyone is aware that you can also deduct any local excise tax paid on your vehicle as long as the tax is yearly and is based on the value of the vehicle. Charitable deductions are another area that are often overlooked. Remember that the deduction is not just for cash contributions; clothing and other personal items can also be deducted. Lastly, be sure to include any fees paid to your CPA or Financial Advisor as they may be deductible.
Retirement Contributions - Technically you can still make an Individual Retirement Account (IRA) or Roth IRA contribution for the 2015 calendar year up until April 18th of 2016. The contribution limit, although subject to Adjusted Gross Income (AGI) limitations, is up to $5,500 per person with an additional $1,000 “catch-up” contribution allowed if you are over 50 years old. If you make an IRA contribution it may be deductible on your 2015 tax return and could reduce your tax liability.
Avoid Fraudulent Schemes - The IRS does not reach out to individuals through the phone or by email, they generally send letters via snail mail. If you receive a phone call or email from someone claiming to work for the IRS, it’s probably someone trying to scam you. Do not give any personal information over the phone or email, and report the incident to the proper authorities immediately. The IRS, through their website, continues to issue warnings about tax scams, including fake IRS agent phone calls, email phishing, and other identity theft attempts by criminals.
Protect Your Personal Information - Never enter personal information through a link or an unsolicited email. Many of these links contain phishing schemes where they clone a page to look like the real site; however, it’s actually a fake site designed to steal your user credentials. Any electronic documents containing sensitive information should be password protected or encrypted before it is transmitted online. All paper documents containing confidential data should be shredded, unless they are being used to support your tax return. Supporting paperwork should be filed away in a safe and secure location.
Choose Direct Deposit for Your Tax Refund - If you are being issued a refund, a direct deposit refund into your personal bank account is the most secure method. Since your refund goes directly into your account, there’s no risk of having your refund check stolen or lost in the mail. Furthermore, direct deposit is the fastest way to get your refund. You should deposit your refund into an account in your own name. Avoid making a deposit into accounts owned by others. If you are filing a joint tax return, some banks require both spouses’ names on the account to deposit a tax refund.