Plan Now for Next Year’s Taxes

7 Great Ways to Be Ready for Next Year

Most people stop thinking about taxes after they file their tax return. But, there’s no better time to start tax planning than right now. And, it’s never too early to set up a smart record keeping system. Here are six tips to help you start to plan for next year’s taxes:

1. Take action when life changes occur — Some life events, like a change in marital status, the birth of a child or buying a home, can change the amount of taxes you owe. When these events occur during the year, you may need to change the amount of tax withheld from your pay. To do that, you’ll need to file a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. You can use the IRS Withholding Calculator  to help you fill out the form.

2. Report changes in circumstances to the Health Insurance Marketplace.  If you enroll in insurance coverage through the Health Insurance Marketplace for  2016 coverage, you should report changes in circumstances to the Marketplace when they happen. Report events such as changes in your income or family size. Doing so will help you avoid getting too much or too little financial assistance.

3. Keep records safe — Put your tax return and supporting records  in a safe place with your other tax documents. That way, if you ever need to refer to your return, you’ll know where to find it. For example, you may need a copy of your return if you apply for a home loan or financial aid. You can also use it as a guide when you do next year’s tax return.

4. Stay organized —Make sure your family puts tax records in the same place throughout the year. This will avoid a search for misplaced records next year. Print and keep a copy of this year’s tax return and supporting records together in a safe place. This includes W-2 Forms, Forms 1099, bank records and records of your family’s health care insurance coverage. If you ever need your tax return or records, it will be easier for you to get them.

5. Shop for tax preparation services — If you are thinking about hiring a professional tax firm to help you with tax planning, start your search now. Choose a tax preparer wisely – you are responsible for the accuracy of your tax return no matter who prepares it. Find tips for choosing a preparer from Carpenter Evert.

         Not sure if you need professional help? Take this short quiz to find out.

6. Think about itemizing — If you usually claim a standard deduction on your tax return, you may be able to lower your taxes if you itemize deductions instead. A donation to charity could mean some tax savings. See the instructions for Schedule A (Form 1040),   Itemized Deductions, for a list of deductions.

7. Stay informed. Gather as much information as you can throughout the year, especially as tax and health care issues change. Subscribe to Carpenter Evert’s monthly newsletter to stay on top of the latest tax changes. The IRS also offers tips about tax law changes, how to save money and much more at IRS Tax Tips.

A little tax planning now can pay off big at tax time next year. Not sure where to start? Contact a Carpenter, Evert and Associates tax expert at(952) 831-0085 and we will point you in the right direction.

Above-the-Line Tax Deductions

Above the Line Tax Deductions from Carpenter Evert and AssociatesThere are a series of income adjustments you can take on the bottom of page 1 of your Form 1040 or Form 1040A. These adjustments, which reduce the taxable income you’ll declare, are known as above-the-line deductions—you enter them just above the last line on the page, where you report your adjusted gross income (AGI).

Above-the-line deductions offer two key advantages. First, you are allowed to take the deductions regardless of whether you itemize deductions on Schedule A of your tax return.

Second, above-the-line deductions reduce your AGI and, in many situations, also reduce your modified adjusted gross income (MAGI). A lower AGI or MAGI can provide tax savings on various tax return items. For instance, most taxpayers now can deduct medical expenses only to the extent they exceed 10% of AGI. With a lower AGI, you may qualify for a larger itemized medical deduction.

There are more than a dozen categories of above-the-line deductions:

IRAs. You can make contributions for 2014 until April 15 of 2015. Although many taxpayers won’t be able to deduct IRA contributions because of income and participation in an employer plan, some people might qualify for deductions.

Example: Alice Baker is a homemaker with no earned income in 2014; her husband, Carl, is employed and participates in his company’s retirement plan. The couple’s MAGI for 2014 is over $116,000, so Carl cannot make a deductible IRA contribution for that year. However, if the couple’s 2014 MAGI is less than $181,000, Alice can make a fully tax deductible contribution of up to $5,500 ($6,500 if she is 50 or older).

Other retirement accounts. Contributions to such accounts also reduce your AGI. Plus, if you had self-employment income in 2014, you can contribute to a simplified employee pension (SEP) plan until the due date of your 2014 tax return. And, with a filing extension, the SEP deadline can be October 15, 2015. You generally can contribute nearly 20% of your self-employment income, with a SEP contribution cap of $52,000 for 2014.

Health Savings Accounts (HSAs). With certain high deductible health insurance plans, you can make tax-deductible contributions to an HSA; you can tap these accounts for health care costs without owing income tax. Again, if you qualify for a 2014 HSA contribution, the deadline is April 15, 2015. Contribution limits go up to $7,550 for someone age 55 or older with family coverage.

Self-employed health insurance. Self-employed individuals can deduct the premiums paid for any medical insurance, dental and long-term care insurance. Policies also can cover the worker’s spouse, dependents, and non-dependent children who were under age 27 at the end of last year. What’s more, the IRS has said that Medicare premiums paid by self-employed individuals can be taken as an above-the-line adjustment to income. There are some conditions that must be met to claim this deduction..

Alimony. Amounts you paid to a former spouse under a divorce or separation decree that qualify as alimony for tax purposes are deductible here.

Need help planning for next year’s taxes? It’s never to early. Call  the tax experts at CEA – (952) 831-0085.

 

Carpenter Evert’s Top Ten Tax Tips for 2014

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The Internal Revenue Service is providing tax tips on its website at  the IRS website between now and April 15 on a wide range of tax subjects. Carpenter, Evert and Associates has put together our top ten favorite IRS tax preparation tips for you.

Carpenter Evert’s Top Ten Tax Tips for 2014:

  1.  How to Choose Professional Tax Services  Make sure you are hiring the right professional to prepare your taxes.
  2. Are you Eligible for the Earned Income Tax Credit?  This tax credit assists middle and low income earners. See if you are eligible.
  3. Tax Return Information is Now at Your Fingertips  The IRS is making it easy to follow the status of your tax return this year.
  4. Don’t Miss Out on Important Tax Credits  Should you file a return this year? Don’t forget about some important tax credits you can only get by filing.
  5. Tax Benefits for Parents  One place kids can actually save you money is when you file your tax return. See the most common deductions for parents.
  6. How Will the Affordable Care Act Affect Your Taxes?  The IRS has designed a series of Health Care Tax Tips to help you understand how the ACA will affect you and your taxes.
  7. Do you Know Your Tax Filing Status?  It’s important that you use the correct filing status when you file your tax return. Find out which one is right for you.
  8. What to Know About Declaring your Tips  If you receive tips at your job, you need to know the ins and outs of declaring tip income on your tax return.
  9. Taxable and Nontaxable Income – What’s the Difference?  The IRS gives advice on what income is taxed and what isn’t.
  10. Tax Deductions for Charitable Contributions  Making a charitable contribution is a win-win situation. You’re helping a charity, and in turn you may be eligible for a tax deduction.

Do You Know Your Tax Filing Status?

7 - word chalkboardIRS Tax Tip #7 from Carpenter, Evert and Associates – Your Tax Filing Status

Request a free tax organizer from Carpenter, Evert and Associates

Not sure what filing status to use when you file your taxes? The IRS has some helpful guidelines:

Choosing the Right Filing Status –

Using the correct filing status is very important when you file your tax return. You need to use the right statusTaxes - white note with pushpin because it affects how much you pay in taxes. It may even affect whether you must file a tax return.

When choosing a filing status, keep in mind that your marital status on Dec. 31 is your status for the whole year. If more than one filing status applies to you, choose the one that will result in the lowest tax.

Note for same-sex married couples. New rules apply to you if you were legally married in a state or foreign country that recognizes same-sex marriage. You and your spouse generally must use a married filing status on your 2013 federal tax return. This is true even if you and your spouse now live in a state or foreign country that does not recognize same-sex marriage. See irs.gov and the instructions for your tax return for more information.

Here is a list of the five filing statuses to help you choose:

1. Single.  This filing status normally applies if you aren’t married or are divorced or legally separated under state law.

2. Married Filing Jointly.  A married couple can file one tax return together. If your spouse died in 2013, you usually can still file a joint return for that year using this filing status.

3. Married Filing Separately.  A married couple can choose to file two separate tax returns instead of one joint return. This filing status may be to your benefit if it results in less tax. You can also use it if you want to be responsible only for your own tax.

4. Head of Household.  This filing status normally applies if you are not married. You also must have paid more than half the cost of keeping up a home for yourself and a qualifying person. Some people choose this status by mistake. Be sure to check all the rules before you file.

5. Qualifying Widow(er) with Dependent Child.  If your spouse died during 2011 or 2012 and you have a dependent child, this filing status may apply. Certain other conditions also apply.

IRS e-file will help you choose the right filing status. You can also find the rules on this topic in Publication 501, Exemptions, Standard Deduction, and Filing Information. It’s available on IRS.gov or by calling 1-800-TAX-FORM (800-829-3676).

Additional IRS Resources:

Carpenter, Evert and Associates Top Ten Tax Tips for 2014:

  1. How to Choose Professional Tax Services
  2. Are you Eligible for the Earned Income Tax Credit?
  3. Tax Return Information is Now at Your Fingertips  
  4. Don’t Miss Out on Important Tax Credits
  5. Tax Benefits for Parents
  6. How Will the Affordable Care Act Affect Your Taxes?
  7. Do you Know Your Tax Filing Status?
  8. What to Know About Declaring your Tips 
  9. Taxable and Nontaxable Income – What’s the Difference? 
  10. Tax Deductions for Charitable Contributions

Help with Taxes – The IRS Top 10 Tips

10 - red numberThe Internal Revenue Service is providing daily tax tips on its website at  the IRS website. The tax tips will be published daily between now and April 15, covering a wide range of tax subjects:

  • Errors to avoid when preparing your taxes
  • Making the most of tax deductions and credits
  • How to choose a tax preparer
  • E-Filing your taxes – how-tos
  • How to file for an extension on your taxes
  • The fastest way to get your tax refund

Carpenter, Evert and Associates will bring you our favorite top ten IRS tax preparation tips over the next few weeks. Meanwhile, check out these You Tube videos on a variety of tax topics, from the IRS:

The IRS has short and informative YouTube videos on a number of tax-related topics in English, Spanish and American Sign Language (ASL). The channels have received nearly 6.5 million views:

Do-It-Yourself Free Tax Preparation ─ Helps taxpayers find free help from certified volunteers to electronically file tax returns. Taxpayers interested in helping their own communities can also watch a video to learn about becoming involved in the Volunteer Income Tax Assistance or Tax Counseling for the Elderly programs.

Do I Have to File Taxes? ─ Learn about the requirements for filing a tax return, including income limits and age, and why taxpayers may want to file even if they don’t have to.

How to Get 1040 Tax Forms ─ Provides tips on the quickest way to get the various 1040 forms on IRS.gov.

Income Tax Scams ─ Offers some tips on how to protect personal information and avoid becoming a tax scam victim.

Record-keeping for your taxes ─ Learn which financial and tax files to keep and how long to keep them.

Choosing a Professional Tax Service  ─ Hear some useful tips for choosing a reputable tax preparer.

If you need help right now, contact your tax expert at Carpenter, Evert and Associates at (952) 831-0085. Not sure if you need professional help? Answer these questions to see if you need help with your taxes.

Carpenter, Evert and Associates Top Ten Tax Tips for 2014:

  1. How to Choose Professional Tax Services
  2. Are you Eligible for the Earned Income Tax Credit?
  3. Tax Return Information is Now at Your Fingertips  
  4. Don’t Miss Out on Important Tax Credits
  5. Tax Benefits for Parents
  6. How Will the Affordable Care Act Affect Your Taxes?
  7. Do you Know Your Tax Filing Status?
  8. What to Know About Declaring your Tips 
  9. Taxable and Nontaxable Income – What’s the Difference? 
  10. Tax Deductions for Charitable Contributions

How to Find an Honest Tax Preparer

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Carpenter, Evert and Associates is a certified public accounting firm in Bloomington, Minnesota. Because of our experience and training, we understand the importance of hiring a well-qualified company to do your tax preparation. CPAs are experts in tax preparation and planning, and can give you the highest level of service available. The IRS has released a list of helpful tips to help you avoid what they call abusive tax preparers.

If you need an honest, trustworthy source for tax preparation and planning, call us at (952) 831-0085 for more information about our tax services. You can also request a free tax organizer  from Carpenter Evert to help you get started.

How to Insure You Don’t Hire an Abusive Tax Preparer from the IRS:

IRS Criminal Investigation (CI) reminds you;

  • Taxpayers are responsible for the accuracy of all entries made on their tax returns, which include related schedules, forms and supporting documentation. This remains true whether the return is prepared by the taxpayer or by a return preparer.
  • Be careful in selecting the tax professional who will prepare your return. Some basic tips and guidelines to assist taxpayers in choosing a reputable tax professional are:
    • Avoid return preparers who claim they can obtain larger refunds than other preparers.
    • Avoid preparers who base their fee on a percentage of the amount of the refund.
    • Use a reputable tax professional that signs and enters a preparer tax identification number (PTIN) on your tax return and provides you with a copy for your records.
    • Consider whether the individual or firm will be around to answer questions about the preparation of your tax return, months, even years, after the return has been filed.
    • Never sign a blank tax form.
    • Ask questions. Do you know anyone who has used the tax professional? Were they satisfied with the service they received?
  • Tax Evasion is a crime, a felony, punishable up to 5 years imprisonment and a $250,000 fine.

When in doubt, check it out! Taxpayers hearing claims from preparers offering larger refunds than other preparers are encouraged to check it out with a trusted tax professional or the IRS before getting involved.

Go to the IRS website for more details on Abusive Tax Return Preparers.

Need Professional Tax Help?

Calendar - 15th are you ready The Tax Checklist from Carpenter, Evert and Associates can help you decide if it’s time to hire a tax professional.

To make the most out of your tax deductions, get a free Tax Organizer from Carpenter Evert.

Tax preparation was easy when we were in our 20s. Grab your W-2, a 1040EZ form, and you were done in 15 minutes. As life gets more complicated, so does tax preparation. It can be hard to know when it’s time to pay someone for tax services, so Carpenter, Evert and Associates has come up with a checklist that can help you decide.

Answer yes or no to the following questions to find out if you need professional tax help:

  1. Have you had a major life change this year? Think marriage, divorce, new baby or college.
  2. Did you buy or sell a home, or move to a new state this year?
  3. Did you receive investment income last year? Or did you lose money on investments?
  4. Have your wages increased significantly over the last few years?
  5. Have you recently become subject to the Alternative Minimum Tax?
  6. Do you make over $200,000 in wages?
  7. Do you owe back taxes? Interest and penalties? Are you behind in filing your tax returns?
  8. Have you recently retired and want to make the most of your retirement income?
  9. Did you have self-employment income last year? Are you a business owner?
  10. Do you own rental property?
  11. Have you received an inheritance this year? 
  12. Did you gift a significant amount of money to a loved one?
  13. Was any of your income from foreign sources?
  14. Did you receive any stock compensation – stock options, employee stock-purchase plans?
  15. Was using tax preparation software last year too complicated and time-consuming?
  16. Does the thought of doing your own tax preparation immediately make you start to sweat?

If you answer yes to any of these questions, it is time for professional help.

Storefront tax preparers – think H & R Block or Liberty Tax – are on every corner this time of year. There are some issues to watch out for; most employees are temporary seasonal workers who are trained to prepare tax returns on software much like what you would use at home. For the most part, they are not accountants or bookkeepers, and they won’t be back next year when you need help. Last year, the average cost of a tax return prepared at H & R Block was nearly $200, so it’s not necessarily a bargain either.

A better option is a certified public accounting firm. CPAs are experts – they are highly educated and trained, and are registered with the American Institute of Certified Public Accountants. Just a few of the advantages of hiring a CPA:

  • CPAs go beyond just doing your tax returns. They offer specialized services in a variety of accounting areas. As your circumstances change, they will be ready to help.
  • You will build a relationship with your CPA, much like you would with your banker or financial advisor. By working with a CPA on an ongoing basis, you will have a trusted confidante who cares about you and will work to reduce your tax liability year after year.
  • A CPA is available year-round to answer any tax questions that might arise. They can also advise on budgeting, investments, and life changes.
  • The cost of hiring a CPA is based on the complexity of your tax return and can be surprisingly reasonable.

If you have questions about preparing your taxes, or to make an appointment with a Carpenter, Evert and Associates CPA tax expert, call (952) 831-0085. To request a free tax organizer, click on the link below.

To make the most out of your tax deductions, request a free Tax Organizer from Carpenter Evert.