Tax Filing: Countdown to April 15th
Saturday, 31 January 2015
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Muncie, Indiana NEWS – Every year, taxpayers leave millions of refunded dollars unclaimed or never receive their refunds because of incorrect information on returns. In 2011, the IRS reported nearly 100,000 unclaimed refunds, averaging around $1,500 per person. Leaving money on the IRS table is easily remedied by filing a thorough tax return, but other problems can arise from incorrect filing or simply not filing at all, including IRS fines, legal fees and, if the dollar amount is high enough, even jail time.
Here’s a checklist of how to stay on top of your return this year and make it work to your benefit.
Track down paperwork
It’s easy to succumb to the stress of tax time and stall before you even get started. Before you do anything else, track down any missing paperwork whether you’re a full-time employee, a contract employee or a small business with employees. Make a spreadsheet in Google Docs of all the paperwork you need to stay organized. Don’t forget about paperwork from your financial institutions and lenders.
Organize your deductible expenses
It’s tempting to write off every dinner or taxi as an expense if it overlapped with business in any way. But the IRS requires receipts and an adequate reason that every line item expense is on your return. Credit card statements are not acceptable as receipts, as the IRS now requires a photocopy or electronic copy of the vendor’s receipt.
Don’t under-report your income
Many employees and business owners alike under-report their income by accident. Brush up on what the IRS considers income like gift cards or cash equivalents. Gym memberships and year-end prizes can also be considered income and require reporting. Failing to report income under $600 is also a common confusion for taxpayers. It’s true the person or company paying you doesn’t need to file a 1099 if they paid you less than $600; however, you are required to report the income on your return. The IRS may not notice if you leave it out, but the fines and legal fees probably outweigh the profit you made and failed to report.
Monitor your assets
Identity theft isn’t just confined to stolen credit cards and compromised accounts. Tax identity theft is a pervasive threat and can leave you vulnerable during tax time. Identity thieves file fraudulent returns to collect refunds. If you think you’ve been the victim of a tax filing fraud, contact the IRS, your accountant and contact the police about filing a report. But there are ways to help stop it before it starts.
Check your credit report once a year to scan for any suspicious activity or compromise that could indicate someone is pilfering your social security number or financial information. Update your computers with firewall protection and update any security patches. Don’t give out any financial information or your social security number unless it is specifically required. Sign-up with a service like LifeLock to help protect you from identity theft, educate you about tax filing fraud and immediately alert you about any suspicious activity.
Brush up on the Section 179 Tax Deduction
Did you purchase office equipment last year? You write it off on your current year’s return with the Section 179 Tax Deduction. Deduct the full purchase price of approved equipment or software from your gross income. Any business that purchases, finances or leases equipment less than $2 million dollars can qualify for the deduction. Be aware there are caps to the amount that can be written off in any given year. In 2014, that amount was $500,000.
Here’s a checklist of how to stay on top of your return this year and make it work to your benefit.
Track down paperwork
It’s easy to succumb to the stress of tax time and stall before you even get started. Before you do anything else, track down any missing paperwork whether you’re a full-time employee, a contract employee or a small business with employees. Make a spreadsheet in Google Docs of all the paperwork you need to stay organized. Don’t forget about paperwork from your financial institutions and lenders.
Organize your deductible expenses
It’s tempting to write off every dinner or taxi as an expense if it overlapped with business in any way. But the IRS requires receipts and an adequate reason that every line item expense is on your return. Credit card statements are not acceptable as receipts, as the IRS now requires a photocopy or electronic copy of the vendor’s receipt.
Don’t under-report your income
Many employees and business owners alike under-report their income by accident. Brush up on what the IRS considers income like gift cards or cash equivalents. Gym memberships and year-end prizes can also be considered income and require reporting. Failing to report income under $600 is also a common confusion for taxpayers. It’s true the person or company paying you doesn’t need to file a 1099 if they paid you less than $600; however, you are required to report the income on your return. The IRS may not notice if you leave it out, but the fines and legal fees probably outweigh the profit you made and failed to report.
Monitor your assets
Identity theft isn’t just confined to stolen credit cards and compromised accounts. Tax identity theft is a pervasive threat and can leave you vulnerable during tax time. Identity thieves file fraudulent returns to collect refunds. If you think you’ve been the victim of a tax filing fraud, contact the IRS, your accountant and contact the police about filing a report. But there are ways to help stop it before it starts.
Check your credit report once a year to scan for any suspicious activity or compromise that could indicate someone is pilfering your social security number or financial information. Update your computers with firewall protection and update any security patches. Don’t give out any financial information or your social security number unless it is specifically required. Sign-up with a service like LifeLock to help protect you from identity theft, educate you about tax filing fraud and immediately alert you about any suspicious activity.
Brush up on the Section 179 Tax Deduction
Did you purchase office equipment last year? You write it off on your current year’s return with the Section 179 Tax Deduction. Deduct the full purchase price of approved equipment or software from your gross income. Any business that purchases, finances or leases equipment less than $2 million dollars can qualify for the deduction. Be aware there are caps to the amount that can be written off in any given year. In 2014, that amount was $500,000.